To enhance labour productivity, the government needs to reduce the share of informal employment, which remains high vis-a-vis the OECD average. High severance pay has reduced employers’ incentives to formalise employment relationships, trapping informal workers in low-productivity jobs without access to formal training. Reducing severance pay while further expanding unemployment insurance, would go a long way towards a Chilean model of "flexicurity”, characterised by more flexible employment relationships that would, nonetheless, grant better protection to workers. Openness to trade and foreign investment has intensified competition in domestic markets and facilitated access to imported intermediate goods.