Modeling economic behavior in Peru's informal urban retail sector
Smith, J. Barry
In Lima, Peru, the informal sector makes up half the labor force, accounts for 61 percent of the hours worked, and generates an astounding 39 percent of GDP. More than half the street vendors are women. In the informal sector, the free play of market forces determines returns to productive factors, especially labor. Informal enterprises are concentrated in low-income areas of urban centers. The authors analyze Peru's urban informal sector - particularly women's role in it - based on a theoretical model of informal retail trade. They address these questions: what factors explain differences in the performanceof retail busineesses? If these can be identified, what types of policy initiatives might improve the performance of firms, especially those run by women? The authors recommend : channeling credit to small businesses, promoting cooperatives and self-help associations, providing technical assistance in basic management, making it easier and cheaper to get business licenses and facilitating cooperative child care centers.
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