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In this paper we assess the relationship between labor policies and market outcomes in Bolivia, accounting for a large informal sector mostly comprised of self-employed entrepreneurs. We calibrate a job search and matching model to reproduce labor market features in 2013, a period in which important labor policy changes were simultaneously active for the first time. We focus on some effects of three specific policies namely a 14th salary, minimum wage increases and contributions to a ‘solidary pension fund’ on the sorting of workers between unemployment, formal and informal employment, as well as on the formal wage schedule.

On the relationship between labor market policies and outcomes in Bolivia: A search and matching approach