Job Cretaion and Destruction and the Informal Sector

This paper analyses the employment creation and destruction rates in Lima Metropolitan Area. This work is relevant because there is no literature about these indicators for developing economies with high levels of informality. We find that these indicators are on average similar to those found for developed economies; however the corresponding values for the informal sector are three times larger than those for the formal sector. There is an important heterogeneity of both series, creation and destruction rates, according to some covariates; additionally, these two variables are related to the business cycle: the destruction rate is countercyclical and the creation rate is procyclical, being this cyclicality larger in the formal sector.