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Latin America and COVID-19: Shutting Down in a World of Informal and Tiny Firms

Laura Alfaro et al.

Economia, the Journal of Latin American and Caribbean Economic Association (LACEA)2025https://doi.org/10.31389/eco.455article
ABDC B
Weight
0.50

Abstract

Employment losses in 2020 were larger in Latin America than in any other region. We show that the prevalence of informality, micro-entrepreneurship, and jobs-not-fit for remote work in nonessential sectors accounts for this outcome in both simulations and ex post data. When considering lockdowns and demand shocks, amplified by input–output linkages and a Keynesian multiplier, these distinctive characteristics imply that the risk of employment losses in a typical Latin American economy is at least five times higher than that of a counterfactual United States. Our framework explains over 70 percent of the observed cross-sector variation in work hours in the second quarter of 2020. Early blanket lockdowns, such as those implemented in part of Latin America, affect informality differently and outweigh other factors. JEL Classification Codes: F; O47; O20; O17

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https://doi.org/https://doi.org/10.31389/eco.455

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@article{laura2025,
  title        = {{Latin America and COVID-19: Shutting Down in a World of Informal and Tiny Firms}},
  author       = {Laura Alfaro et al.},
  journal      = {Economia, the Journal of Latin American and Caribbean Economic Association (LACEA)},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.31389/eco.455},
}

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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