Out of the shadows: Classifying economies by the extent and nature of employment in the informal economy

Abstract

Given the commonality of employment in the informal economy, this paper moves beyond classifying nations by the composition of their formal economies and instead classifies countries by the extent and nature of employment in the informal economy. Analysing ILO data on the size and character of employment in the informal economy in 36 developing economies, the outcome is to reveal a significant correlation between cross-national variations in the degree and intensity of informalisation and cross-national variations in GNP per capita, corruption, poverty, taxation and social contribution levels. The paper concludes by discussing the implications for theory and policy.Keywords: informal sector; shadow economy; developing economies; economic development. IntroductionUntil now, classificatory schemas of economies have differentiated countries by the character of their formal economic systems, such as by their levels of Gross Domestic Product (GDP) or Gross National Income (GNI) per capita (World Bank, 2013), whether they are control, market or mixed economies (Arnold, 1996;Rohlf, 1998), or liberal or coordinated varieties of capitalism (Hall and Soskice, 2001). This would be appropriate if the majority of employment globally was in the formal economy. However, this is not the case (Jütting and Laiglesia, 2009;ILO, 2012ILO, , 2013 Williams and Lansky, 2013). Consequently, the aim of this paper is to develop a classification of economies according to the commonality and character of employment in the informal economy. The importance of doing this is that it not only brings to the fore the persistence of employment in the informal economy across the world but also draws attention away from the formal labour market in which only a minority of jobs globally are located and towards what is to be done about employment in the informal economy in which the majority of jobs are found.To do this, the first section will briefly review how employment in the informal economy is defined, provide a typology that classifies economies according to the extent and nature of employment in the informal economy and review the competing explanations for the cross-national variations in the prevalence and character of employment in the informal economy. In the second section, and to begin to classify economies and evaluate critically the competing explanations for the cross-national variations, a data set is then introduced, namely the ILO dataset of country surveys on the informal sector and informal employment, which contains data on the level and nature of employment in the informal economy in 36 developing countries. The third section then reports the descriptive findings on the crossnational variations in the degree and intensity of informalisation followed in the fourth section by a preliminary evaluation of the competing explanations for these cross-national variations. The fifth and final section then concludes by summarising the findings and discussing their theoretical and policy implications.

Hardwar: Spirit, Place, and Politics

“…Siva, the all-powerful and generous lord of Hardwar and the Ganges, likewise has no acumen for worldly games and prefers instead to live in a drunken stupor in cemeteries. For these young men coming of age amidst frightful economic uncertainty, in a country where more than 80 percent of workers must resign to working in the informal sector with little social security, and where about 60 percent of people survive on less than $3.2 a day, identification withŚiva allows them to give a positive twist to the impending threat of economic deprivation and social disgrace in their own lives (World Bank 2018;Williams 2015). For thousands of years, Siva has symbolized an antinomian tradition subverting India's caste and status orthodoxies, and the participants are tapping into this potentiality of the Hindu pantheon.…”

Informal economy and extractive institutions

“…"exiting". This view is contended by a number of scholars (see, for instance, Portes and Sassen-Koob, 1987;Williams, 2015), who maintain that such alleged relationship is not validated by empirical evidence. Hence, the hypothesis to test is that regulations might alter the incentives to switch into informality.…”

Worlds of Work: Changing Landscapes of Production and the New Geographies of Opportunity

“…The specific form that informalization takes varies from region to region and is dependent on the employment norms and regulations that are present in different domestic economies (Williams ). Informalization is, after all, a process that reworks established conventions regarding employment tenure, work hours, pay scales, and labor protections.…”