Paraguay has achieved positiveemployment outcomes over the last decade, reflecting morejobs and improved average job quality, which togethercontributed to significant poverty reduction. Firms played amajor role in creating these jobs, especially formal jobs.It is important to understand how firm performance hastranslated into employment, the nature of the resultingjobs, and the factors affecting these outcomes. Usingfirm-level datasets, this analysis explores thecharacteristics of firms that are growing or stagnating; thesectors into which new firms are entering or incumbent firmsare expanding their operations; and the factors that may behelping or hindering firms to enter, expand, or increasetheir productivity. High rates of informality and evasioncreate a challenging private sector environment for firms,but even among formal firms, the prevailing structure ischaracterized by micro-firms that lack scale economies, areconcentrated in non-tradables, have generally lowproductivity levels, and rely on unskilled employment. Theanalysis also finds a pervasive duality between micro-sizedlow-productivity firms on one end, and a small number ofhighly productive firms in concentrated markets on the otherend. These results imply some important challenges for thecontinued development of a healthy, dynamic and inclusiveprivate sector.
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