Piritta Sorsa, Jens Arnold, Paula Garda, 13 January 2020

Economic growth in Latin America has been persistently lower and more erratic than the emerging economies of Asia, largely due to low productivity borne out of both weak competition and a large informal economy. This column analyses the various factors that have caused these conditions to exist in several Latin American countries, and how policies to counteract them have fared. For significant progress, a detailed strategy of simplifying regulations, easing administrative burdens, encouraging market entry, and reducing trade barriers is required to formalise workers and encourage market competition.

Sebastian Galiani, Camila Navajas Ahumada, Marcela Meléndez, 10 August 2015

Informality is widespread in most developing countries. A challenge for governments is to lure informal firms into the formal economy. This column presents evidence from an experiment designed to induce formalisation in Colombia. Assistance through the bureaucratic process and the removal of the fixed costs of formalising increased the likelihood of formalisation. However, this effect did not persist over time, with many firms returning to the informal sector when minimal fixed costs came back into effect.

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