Labour Formalization and Inequality: The Distribute Impact of Labour Formalization in Latin America During the 2000s

Available from: 
August 2021
Paper author(s): 
Roxana Maurizio

Inequality and informality are two characteristics still present in Latin America. However, the region has experienced a trend towards labour formalization and lower wage inequality during the new millennium. The aim of this paper is to analyse the inflows to formality in four Latin American countries -Argentina, Brazil, Ecuador and Peru- during the 2000s, and assess their distributive impacts. This aspect is relevant given the fact that the increase in formal wage earners was particularly marked, on the one hand, and on the other, it is not possible to determine a priori the sign and intensity of the formalization process on wage distribution. Therefore, the link between both dimensions –inequality and formality- is an empirical question. The results show that labour formalization had an important equalizing effect in Argentina, Brazil and Ecuador, but it was unequalizing in Peru. Most of the existing literature focuses on the distributive impacts of the returns to education. Our study complements these results by adding the working conditions dimension and showing that their improvement can contribute to explain the decreasing trend of inequality observed in Latin America during the 2000s.


Research section: 
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