Abstract

MARTINEZ LUIS, David; CAAMAL CAUICH, Ignacio; AVILA DORANTES, José Antonio  and  PAT FERNANDEZ, Lucio Alberto. Fiscal policy, labor market and informal employment in Mexico. Rev. mex. econ. finanz [online]. 2018, vol.13, n.1, pp.77-98. ISSN 2448-6795.  https://doi.org/10.21919/remef.v13i1.260.

Changes in economic policy and in the labor market may influence Mexico´s informal economy. The objective of this article was to analyze the effects of a variety of macroeconomic variables on informal employment in Mexico. In order to determine these effects, we designed a simultaneous equation model and estimated this model using the two-stage ordinary least squares method. Results indicate that price levels, production of the service sector, and the minimum wage have an effect on informal employment. As informal employment is determined by a variety of factors, it is difficult to include them in a model; however, the model estimated may help guide economic policy seeking to detain the growth of informal employment. We conclude that an increase in the purchasing power of formal wages and job creation in the secondary sector may decrease informal employment. Previously, no model had been estimated which allowed for identifying those factors affecting growth of formal and informal employment. Up till now, no model showing the factors affecting growth in formal and informal employment has been estimated.

Keywords : informal employment; minimum wage; Gross Domestic Product; elasticity; J46; J21; J31; E23.