Informal Employment Dynamics in Paraguay

I characterize informal-formal employment transitions in Paraguay. Results indicate that some factors, such as education and firms size, improve workers' movement between informal and formal employment, and wage gains from moving into formality are modest. Workers who tend to stay indenitely informal are more likely to become unemployed or inactive. Estimates, based on a survival model, indicate that education and firm size highly increase informal-to-formal transitions, especially if workers have stayed informal for a long time. Older women have lower formal-to-informal transitions and, surprisingly, education plays no significant role. Mincer estimates point to high wages for formal workers, compared with informal, but that individual workers' wage gains from moving into formality are small.