Weak competitiveness and institutionality: The unsustainable growth of the informal model

This study reviews different theories about the relationship between informality, competitiveness, and institutionality and contrasts them with empirical evidence from the past decade in Peru, particularly to explain the articulation of the formal and informal economy. The study concludes that there has been a combination of growth and institutional weakness without competitiveness, which is the economic and social model of informality. This is the foundation of the transition from “soft informality” to “hard informality,” with a consequent expansion of a culture of transgression and increasing transaction costs. The unsustainable growth cycle experienced in the first decade of the new millennium created an easy success that is now being tested with changes in the national and global environment. The study is based on an extensive bibliography review and on databases of national and international statistics.