Mexico has a relatively large informal sector by OECD standards. While this is in part a symptom of
limited development and low productivity, it can also be to some extent its cause, as informal firms stay
small to hide their activities and have limited access to productivity-enhancing government services, such a
protection of property rights and training. A long-term and broad-based strategy with education at its core
is needed for Mexico to reach its productivity potential and fight informality. Lowering the costs of
formality, while enhancing its benefits and increasing the cost of non-compliance with labour and tax laws,
will be an important part of this strategy. This would include more flexible labour laws, a further reduction
in the business regulatory burden and a rethink of the social security package to enhance its attractiveness
for low-wage workers and limit costs by making service provision more efficient.
This Working Paper related to the 2011 OECD Economic Survey of Mexico. (www.oecd.org/eco/surveys/Mexico)
Informality in Mexico
OECD Economics Department Working Papers
