Post-Reform Labor-Market Trends in Urban Bolivia: Formal versus Informal Sector

This paper seeks to contribute to the ongoing controversy on the distributional effects of structural reforms in developing countries. We set-up a small-scale macroeconomic model of a dual economy to capture the transmission mechanisms through which the deregulation of product and factor markets, opening up to international trade and foreign direct investment, and the privatization of public companies impact on the employment share and the wage premium of the formal sector. We test the theoretical model for the case of Bolivia using the methodology proposed by Oaxaca and Ransom (1994).