From Informality to Insight: Rethinking Economic Growth in Peru

Guest blog by Jennifer Infantas Paz de Noboa, LEG ’25

Over the past ten weeks, this course challenged the way I understand economic growth, public policy, and the hidden mechanics that keep countries like Peru stuck. I came in thinking our biggest challenge was “informality.” I leave understanding that informality is not the problem, but a symptom of deeper constraints, institutional gaps, and missing know-how. 

Ideas That Shifted My Thinking 

Idea 1: Growth is Not About Doing More — It’s About Doing What Matters 

I used to view growth strategies as long lists of reforms. The course flipped that logic: successful countries focus on the binding constraint, the one bottleneck holding the system back. For Peru, it’s not all labor regulation, education gaps, credit barriers, and informality at once — it’s the specific institutional and coordination failures that make formalization unprofitable. 

Idea 2: Know-how Moves Through People, Not Policies 

This single insight broke a huge misconception for me. We can train forever, legislate endlessly, or invest in schools. Yet new know-how spreads through migrated talent, diaspora networks, firm spinoffs, and private-sector problem-solvers, not classrooms. That explains why Peru’s informal economy struggles to upgrade — the know-how does not flow where it is needed. 

Idea 3: Economic Complexity Is a Compass, Not a Scoreboard 

Before the course, I read complexity indicators as static “rankings.” Now I understand them as guiding maps that help identify feasible diversification paths. Peru’s problem is not only low complexity — it is that we are stuck on the periphery of the product space, making small moves instead of strategic leaps. 

Idea 4: A Binding Constraint Is Revealed Through Prices, Not Wish Lists 

Ricardo Hausmann’s insistence on price signals reshaped how I interpret data. High interest rates for small firms, high costs of compliance, and the wage-productivity gap are all price hints of scarcity — not failures of effort. Prices tell the truth that policy narratives are often obscure. 

Idea 5: Change Happens Through Iteration, Not Master Plans 

This was the biggest mindset shift. Instead of designing the perfect reform, the course taught me to design learning-driven strategies, test ideas at a small scale, engage many actors, and build solutions adaptively. Growth is not a blueprint — it is a process of discovery. 

Taken together, these five ideas left me with one powerful conclusion: Peru will not grow by trying harder — it will grow by learning faster. 

Progress on My Growth Challenge: What Changed in 10 Weeks 

I began with a broad goal: reducing informality to boost productivity. As the weeks passed, this challenge became clearer, sharper, and grounded in real diagnostics. 

Week 1–3: Breaking Down the Problem 

Building the fishbone diagram forced me to deconstruct informality into its underlying causes: weak institutions, costly regulations, low trust, lack of know-how, disconnected skills, and inadequate infrastructure. I learned that informality persists because it is often rational for workers and firms under current constraints. 

Week 4–6: Identifying Binding Constraints 

Using Atlas data and price-based logic, I found the binding constraint is not low skills or lack of credit per se, but weak institutional coordination and a high-cost, low-value regulatory environment that makes formalization unattractive. This insight reframed the growth challenge. 

Week 7–8: Defining Entry Points 

I realized that countries win by choosing specific green niches and developing ecosystems around them. For Peru, this means leveraging existing strengths (minerals, biodiversity, energy potential) while investing in know-how to move up green value chains. The key insight from these weeks were that the transition is fundamentally a competition for capabilities, and early movers can turn it into long-term productive transformation. 

Week 9–10: Building a Strategy 

I learned that measurement is a strategic tool that guides learning and course-correction, not an administrative task. What matters is detecting early signs of transformation—new capabilities, greener production, stronger networks, more sophisticated exports. These weeks taught me that progress must be measured through evolving capabilities, not static indicators. 

In short, the challenge I started with became a strategic agenda grounded in problem-driven, evidence-based learning. 

Using What I Learned: Five Practical Applications 

1. Designing Policies as Experiments, Not Decrees 

I will advocate for small pilots to test reforms before scaling them, especially in labor formalization. 

2. Using Complexity Maps to Guide Sectoral Policy 

Sector diversification efforts will focus on adjacent possible products where Peru already has partial knowhow. 

3. Building High-Bandwidth Teams 

I now understand which institutions are low vs. high bandwidth and how to help them work as learning systems. 

4. Using Diaspora and Private Networks to Move Knowhow 

Instead of relying solely on public training, I will push for strategies that bring people with knowhow into Peru, especially for green industries, digital services, and advanced manufacturing. 

5. Measuring Inclusion and Productivity Together 

I will combine complexity indicators with labor informality, wage-productivity gaps, and firm productivity metrics to monitor Growth + Inclusion. 

As I move forward, I find myself grappling with a set of interconnected questions that will shape how I continue exploring economic growth and public policy. I wonder how policymakers can design interventions that remain adaptive in environments defined by uncertainty, limited state capacity, and political volatility—and, just as importantly, how evidence can be translated into decisions when institutions struggle to absorb complexity. This leads me to ask whether behavioral insights, incentive design, and implementation science can meaningfully close the persistent gap between policy intention and real-world outcomes.  

At the same time, I am curious about how countries like mine can foster innovation and productivity while confronting structural barriers such as informality, governance limitations, and uneven access to opportunities.  

Finally, I keep returning to a broader, unresolved question: how can we balance the pursuit of growth with social legitimacy, ensuring that reforms not only generate economic value but also earn the trust and participation of citizens? These questions will guide my next stage of learning, pushing me to move beyond frameworks and toward a deeper understanding of what it truly takes for societies to grow. 

This course changed the way I see Peru, growth, and the role of government. I now understand that growth is not a matter of political will, financial resources, or designing the right reform package. Growth is a process of discovery, fueled by collective learning, new know-how, and the capacity to adapt. 

I leave this experience convinced that Peru has the potential to grow — but only if we build institutions capable of listening, experimenting, coordinating, and iterating. The path to prosperity is not linear. It is a network of opportunities waiting to be uncovered by teams who learn faster than the problems evolve. 

Economic growth is not something we impose on a country. It is something we learn our way together. 

This is a blog series written by the alumni of the Leading Economic Growth Executive Education Program at the Harvard Kennedy School. 63 Participants  successfully completed this 10-week online course in December 2025. These are their learning  journey  stories.