How are retro-style games like Papers Please and The Escapists made?
Every game is made different, some people use engines like Game Maker (Gunpoint), others code everything. There's no real different between retro styled games and the rest, just the graphics (it may be easier for some people, but could be harder for others).
You can do a relatively retro-looking game just by using low-res art assets, limiting your total on-screen and per-sprite colors, and by choosing an appropriate (smallish) color palette. For example, if you want a game to look distinctly like an NES title, the single biggest thing is using just the ~56 colors that the NES could display -- the NES palette is particularly distinctive because its not an RGB palette, and hence its a little odd (e.g. there's no really good 'orange'). That alone evokes the feeling of an NES game, but to really drive it home you would want to place further restrictions on yourself, like only using 3 colors + transparency in each tile making up the sprite (8x8 or 8x16 pixels), or in each 16x16 pixel area of the background -- these were hardware limitations of the NES hardware, other hardware had similar restrictions; it wasn't until the Saturn/Playstation era that only memory, not hardware, was the primary limit on 2D graphics.
Aside from that, just avoid doing things that would have been impractical or impossible on the old hardware -- no smooth sprite rotations on an NES, so use the same work-arounds the old games used. No alpha transparency either, again, use the same work-arounds the old games used.
Then, you can go a step further still and use the really neat hardware effects that systems like the NES and SNES could do -- change the color palette entires between frames or scanlines to perform palette animations, gradient effects, or to use more colors than is possible in the naive way; scale and shift the scanlines to create perspective in the same way that old racing games like Pole Position did them.
Basically, you imitate the limitations, quirks, and clever hacks that all the old games had to live with.
According to an interview I read, Paper Please was written in HAXE / OpenFL and the sounds were sourced from some (free?) sound effects site. It was written from the ground up by an experienced ex naughty dog developer. It's simplier than a fully featured 3D game for sure, but still a fair bit of work involved to create a polished game with all art assets for a one man team, you can download the source code to a few of Lucas Popes other games from his site. You can download all the art assests for PP here http://bit.ly/161CBCN. He also has a DevLog which you might find some usual info from.
Papers please is a great game because well the graphics are "simple" the gameplay is challenging and creative
The biggest pitfall I can see in making a pixelly, retro-styled game is having inconsistent pixel sizes. Many engines don't have a built-in way of rendering your game to a low-res surface. If you don't do this, you'll get badly aligned diagonal pixels every time you rotate something, and badly aligned sub-pixels every time you resize something. Some people don't care at all and even float-position their pixel art, making for some really cringe-inducing alignment between pixel art sprites.
