Social programs can reduce productivity and growth as they inadvertently generate perverse incentives for workers and firms. The core hypothesis is that these programs segment the labor market, tax formal salaried employment and subsidize informal salaried and non-salaried employment. Larger...

This paper develops a search and matching model where firms and workers are allowed to form matches (jobs) that can be formal or informal. Workers optimally choose the level of schooling acquired before entering the labor market and whether to search for a job as unemployed or as self-employed....

Over the last two decades Mexico has had an open trade regime, experienced macroeconomic stability, and made substantial progress in education. However, average workers¿ earnings have stagnated and earnings for workers with more schooling have declined, compressing the earnings distribution and...

In this introduction, the authors do three things. They first introduce the puzzle and relate it to existing interpretations from market reformists and their critics, arguing that both sets of views are inadequate. The authors then offer an alternative interpretation: that entrenched inequities...

This paper is concerned with the problem of poverty in Mexico. Its four objectives are to : i) present evidence; ii) analyze economic determinants; iii) discuss policy options; and iv) assess existing poverty programs. The author begins by giving a very brief discussion of recent economic events,...

The desing of a regional development policy for the southeast of Mexico should go beyond and increase in social expenditure: it requires a trough policy review to attack the structural problems which have inhabited the region’s economic development. This paper presents evidence of social and...

The authors use Mexican agriculture as a case study to analyze the transition problems that arise in most major economic reforms. They focus on the implications for policy design of the absence of efficient capital markets; on the welfare costs of reforming only gradually; on incentive problems...

This paper: One, pulls together the implications of recent research on poverty indices, nutrition, fertility, incentives and related topics for the design of poverty allevation programs. Two, measures the magnitude and regional composition of extreme poverty. And three, makes a concrete policy...