Pathways to Formalization [electronic resource] : Going Beyond the Formality Dichotomy: The Case of Peru / Diaz, Juan Jose.

Díaz, Juan-José author
Washington, D.C. : The World Bank, 2018.
Government document
1 online resource (31 pages)
Policy research working papers.
World Bank e-Library.

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Other Title:
World Bank working papers.
Local subjects:
Business Formalization. (search)
Business In Development. (search)
Employment and Unemployment. (search)
Energy Policies and Economics. (search)
Health Economics and Finance. (search)
Health Insurance. (search)
Health, Nutrition and Population. (search)
Informality. (search)
Labor Formalization. (search)
Labor Markets. (search)
Private Sector Development. (search)
Small Enterprises. (search)
Social Protections and Labor. (search)
Too often, academics and policy makers interpret formality as a binary choice and formalization as an irreversible process. Yet, formalization has many facets and shades on the business and labor fronts, and firms may not be able or willing to formalize all at once. This paper explores the joint process of business and labor formalization, using a unique panel data set of Peruvian micro enterprises. The paper finds that business formality does not imply labor formality, and vice versa. Further, there is significant churning in and out of different dimensions of formality within a relatively short period. Using an instrumental variable approach, the paper infers that business formalization affects labor formalization but not the other way around, and that enforcement is a key driver of formalization. Overall, the analysis shows that formalization is a gradual and reversible process, with small entrepreneurs weighing their possibilities in each pathway to business (often) or labor (less often) formalization, but rarely both at the same time.
Chacaltana Janampa, Juan.
Díaz, Juan-José.
Rigolini, Iamele P.
Ruiz, Claudia.
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Print Version: Diaz, Juan Jose. Pathways to Formalization; Going Beyond the Formality Dichotomy: The Case of Peru
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