The informal economy has become a globally widespread phenomenon in developed and developing countries, with two billion workers, roughly 60% of the world population, working in the shadow. Understanding the determinants and causes of the shadow economy's (SE) existence is crucial to sustainable development, as it is critically related to countries' growth, poverty, and inequality. This study examines the determinants of the informal sector in 79 developing and developed countries, by applying a multinomial logit model during the period 1999-2013. The overall results confirm that the informal sector determinants are heterogeneous both in significance and size of impact in developed and developing countries. Furthermore, the results reveal that government effectiveness is the most significant determinant for both developed and developing countries, while the agriculture value-added is the primary determinant in the developed ones. Moreover, GDP growth, freedom from corruption, unemployment, and democracy are more effective in determining SE's size in developed countries than in developing countries. Accordingly, the study concludes with presents recommendations for policymakers to focus on implementing policies that help reduce informality gradually by tackling the determinants of informality in each country through implementing a comprehensive policy package tailored to the country's circumstances.