Search results
Informal economy (IE) encompasses a huge diversity of phenomena that vary in composition and size within economies and across regions.
It finds that pervasive informality is associated with significantly weaker economic outcomes—including lower government resources to combat recessions, lower per capita incomes, greater poverty, less financial development, and weaker investment and productivity.
According to the International Labour Organization (ILO; 2018) about 2 billion workers, or 60 percent of the total employed population age 15 years and older, operate in the informal sector. Recent estimates place the size of the informal economy at about one-third of the global economy.
- Direct Approaches
- Indirect Approaches
- Model Approaches
As the name suggests, studies that fall in to the direct approaches category use direct methods such as survey, interview and questionnaire-based microeconomic data in order to estimate the size of the informal economic activity. These surveys can be applied both to households and/or firms. These studies are least likely to give an accurate figure ...
Indirect approaches usually involve using data on some economic indicators and making an inference on informality implied by this data. This means that indirect approaches to estimate the size of informality is based on an interpretation often led by a series of assumptions. According to Schneider and Klinglmair (2004), examples of studies that use...
The model based approaches generally use an underlying economic model constructed using different simplifying assumptions to measure the size of the informal sector. One earlier approach has been developed by borrowing largely from Frey and Pommerehne (1984) as well as Aigner et al. (1988), the so-called, soft modelling technique for estimating the...
- Ceyhun Elgin, Ferda Erturk
- 2019
As a starting point, this paper defines informality as an activity, performed by an individual or a group of individuals (organization, family, clan), that eventually bypasses the state or the overarching entity regulating the life of that group or society.
- Abel Polese
- 2021
We argue that the evidence is most consistent with dual models of informality. We first review these models and stress the supply and demand factors that keep informal and formal economies separate.
This working paper, the first in the WIEGO Working Paper series, provides an overview of the definitional, theoretical, and policy debates on the informal economy.
