Jose C. Galdo

The Long-Run Labor-Market Consequences of Civil War: Evidence from the Shining Path in Peru

This study exploits district-level variation in the timing and intensity of civil war violence to investigate whether early life exposure to civil wars affects labor-market outcomes later in life. In particular, we examine the impacts of armed conflict in Peru, a country that experienced the actions of a tenacious, brutally effective war machine, the Shining Path, between 1980 and 1995. This study finds that the most sensitive period to early life exposure to civil war violence is the first 36 months of life. A 1 standard deviation increase in civil war exposure leads to a 5% fall in adult monthly earnings, 3.5% reduction in the probability of working in formal jobs, and 6% reduction in the probability of working in large firms. Substantial heterogeneity in the earnings impacts emerges when considering variation in the type of civil war violence. Overall, forced disappearances emerge as the most hurtful measure of violence in the long run. Sexual violations disproportionately affected the wages of women, while torture and forced disappearances disproportionately affected the wages of men. Evidence on intervening pathways suggests that short-run health along with schooling and household wealth are important channels in connecting early life exposure to civil war and adult earnings.

Informality and productivity in the labor market in Peru

This article analyzes the evolution of informal employment in Peru from 1986 to 2001. Contrary to what one would expect, the informality rates increased steadily during the 1990s despite the introduction of flexible contracting mechanisms, a healthy macroeconomic recovery, and tighter tax codes and regulation. We explore different factors that may explain this upward trend including the role of labor legislation and labor allocation between/within sectors of economic activity. Finally, we illustrate the negative correlation between productivity and informality by evaluating the impacts of the Youth Training PROJOVEN Program that offers vocational training to disadvantaged young individuals. We find significant training impacts on the probability of formal employment for both males and females.

Informality and Productivity in the Labor Market: Peru 1986 - 2001

Peru has one of the highest informality rates in Latin America, with almost 60 percent of the urban labor force working at the margins of labor market legislation or in microenterprises that lack basic labor market standards (Marcouiller, Ruiz de Castilla, and Woodruff, 1997). This paper identifies two factors that can explain the variation in informality rates in the 1990s. First, Peru experienced a steady increase in employment allocation in traditionally “informal” sectors—in particular, retail trade and transport. Second, there was a sharp increase in nonwage labor costs, despite a reduction in the average productivity of the economy. In addition, the paper illustrates the negative correlation between productivity and informality by evaluating the impacts of the PROJOVEN youth training program.