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Table of Contents
Cover
Half Title
Title Page
Copyright Page
Summary of Contents
Table of Contents
Foreword
Acknowledgments
Authors
Executive Summary
Abbreviations
Chapter 1 Overview
Motivation
Key findings and policy messages
Synopsis
Future research directions
References
PART I: Characteristics of the Informal Economy
Chapter 2 Understanding the Informal Economy: Concepts and Trends
Introduction
Definition of informality
Database of informality measures
Size and evolution of the informal economy
Consistency among the various measures of informality
Cyclical features of the informal economy
Conclusion
Annex 2A: Estimation methodologies
Annex 2B: Tables
References
Chapter 3 Growing Apart or Moving Together? Synchronization of Informal- and Formal-Economy Business Cycles
Introduction
Literature review: Linkages between formal and informal sectors
Data and methodology
Synchronization of formal and informal business cycles
Causal linkages between formal- and informal-economy business cycles
Explaining the cyclicality of the informal sector
Conclusion
Annex 3A: Theory behind the cyclicality of the DGE-based estimates
Annex 3B: Model specifications for measuring co-movement among informality measures
Annex 3C: Causal linkages between formal- and informal-economy business cycles
Annex 3D: Calibrating DGE estimates using survey-based self-employment data
References
PART II: Country and Regional Dimensions
Chapter 4 Lagging Behind: Informality and Development
Introduction
Links between informality and development challenges
Informality and economic correlates
Informality and institutions
Informality and SDGs related to human development
Informality and SDGs related to infrastructure.
Finding the needle in the haystack: The most robust correlates
Conclusion
Annex 4A: Meta-regression analysis
Annex 4B: Regression analysis
Annex 4C: Bayesian model averaging approach
Annex 4D: Tables
References
Chapter 5 Informality in Emerging Market and Developing Economies: Regional Dimensions
Introduction
Informality in EMDEs
East Asia and Pacific
Europe and Central Asia
Latin America and the Caribbean
Middle East and North Africa
South Asia
Sub-Saharan Africa
Conclusion
References
PART III: Policies
Chapter 6 Tackling Informality: Policy Options
Introduction
Data and methodology
Fiscal measures
Other policies
Conclusion
Annex 6A: Policies and informality
Annex 6B: Tables
References
Boxes
2.1 How does informality aggravate the impact of COVID-19?
4.1 Informality and wage inequality
4.2 Casting a shadow: Productivity in formal and informal firms
4.3 Informality, poverty, and income inequality
6.1 Financial development and the informal economy
Figures
1.1 Informality: Main features
1.2 Informality: Extent and evolution
1.3 Formal- and informal-economy business cycles in EMDEs
1.4 Development challenges and informality
1.5 Informality in EMDE regions
1.6 Policies to address challenges of informality
2.1 Informality: Magnitude, variety, and development challenges
B2.1.1 Informality in EMDEs
B2.1.2 Features of the informal sector
B2.1.3 Development challenges
2.2 Informality and development
2.3 Informality in EMDE regions
2.4 Evolution of informality in advanced economies and EMDEs, 1990-2018
2.5 Downward trends in informality, 1990-2018
2.6 Consistency among various informality measures
2.7 Volatility of formal and informal economies, 1990-2018.
2.8 Cyclical features of formal and informal business cycles
2.9 Employment changes during formal and informal business cycles
3.1 Formal- and informal-economy business cycles
3.2 Correlations of informal output with formal output
3.3 Co-movement between formal and informal business cycles
3.4 Coincidence of formal and informal business cycles
3.5 Probability of a recession
3.6 Impact of formal output fluctuations on the informal sector
3C.1 Impact of formal output fluctuations on the informal sector: Alternative instrumental variables
3C.2 Impact of formal output fluctuations on the informal sector: Additional robustness checks
3C.3 Correlations of informal output with formal output: Shares of informal output and employment
3C.4 Impact of formal output fluctuations on shares of output and employment in the informal sector
4.1 Development challenges and informality
B4.1.1 EMDEs: Estimates of informal-formal wage gaps
4.2 Features of informal firms and workers
B4.2.1 Labor productivity in informal firms
B4.2.2 Formal firms facing informal competition
B4.2.3 Labor productivity differential of formal firms with and without informal competition
4.3 Access to finance and public services
4.4 Access to social benefits
B4.3.1 Informality and poverty and income inequality
4.5 Informality and economic correlates
4.6 Informality, fiscal indicators, and institutional quality
4.7 Informality and SDGs related to human development
4.8 Informality and SDGs related to infrastructure
4.9 Results from Bayesian model averaging approach
5.1 Evolution of informality in advanced economies and EMDEs
5.2 Informality in EMDE regions
5.3 Correlates of informality in EMDE regions
5.4 Informality in East Asia and Pacific
5.5 Correlates of informality in East Asia and Pacific.
5.6 Informality in Europe and Central Asia
5.7 Correlates of informality in Europe and Central Asia
5.8 Informality in Latin America and the Caribbean
5.9 Correlates of informality in Latin America and the Caribbean
5.10 Informality in the Middle East and North Africa
5.11 Correlates of informality in the Middle East and North Africa
5.12 Informality in South Asia
5.13 Correlates of informality in South Asia
5.14 Informality in Sub-Saharan Africa
5.15 Correlates of informality in Sub-Saharan Africa
5.16 Informality indicators and entrepreneurial conditions in Sub-Saharan Africa
6.1 Policies to address challenges of informality in EMDEs
B6.1.1 Financial development and informality in EMDEs
B6.1.2 Evolution of financial development in EMDEs
B6.1.3 Evolution of output informality following financial development in EMDEs
6.2 Tax rates and informality in EMDEs
6.3 Firms' tax compliance burdens and informality in EMDEs
6.4 Tax morale and informality in EMDEs
6.5 Government services in EMDEs, 2000-18
6.6 Informality after improvements in government services
6.7 Labor market reforms and informality in EMDEs
6.8 Informality after labor market reforms in EMDEs
6.9 Firm start-up cost and informality in EMDEs
6.10 Governance and informality in EMDEs
6.11 Education and informality in EMDEs
6.12 Access to finance and informality in EMDEs
6A.1 Robustness checks: Evolution of informal output levels following financial development in EMDEs
Tables
2B.1A Summary statistics
2B.1B Summary statistics by country groupings
2B.2 Spearman rank correlations (across countries within individual years)
2B.3 Coincidence of signs of first-differences
2B.4 Volatility of formal and informal economies
2B.5A Cyclical features of recessions in formal and informal economies.
2B.5B Cyclical features of recoveries in formal and informal economies
2B.6A Informal employment during formal and informal business cycles
2B.6B Formal and total employment during formal business cycles
2B.7 Summary of data coverage
2B.8 MIMIC model estimation results, 1993-2018
2B.9 World Values Survey
3C.1 IV-2SLS regression: Baseline results
4D.1 Data: Meta-regression analysis
4D.2 Regression: Meta-regression analysis
4D.3 Labor productivity differential between types of firms
4D.4 Regression: Labor productivity of formal and informal firms
4D.5 Regression: Labor productivity of formal firms facing informal competition
4D.6 Regression: Informality, poverty, and income inequality
4D.7 Regression: Changes in informality and poverty reduction
4D.8 Regression: Changes in informality and improvement in income inequality
4D.9 Data: Bayesian model averaging approach
4D.10 PIP and posterior means (output informality)
4D.11 PIP and posterior means (employment informality)
4D.12 Correlates of employment informality in EMDEs
4D.13 Correlates of informality in EMDEs: MIMIC-based informal activity and WEF index
4D.14 Regression: Developmental challenges and DGE-based output informality in EMDEs
4D.15 Regression: Developmental challenges and self-employment in EMDEs
6B.1 A summary of empirical studies on financial development and informality
6B.2 Data sources of variables used in annex 6A
6B.3 Policy indicators and employment informality
6B.4 Regression results from local-projection models: DGE-based informal output in percent of GDP
6B.5 Regression results from local-projection models: Self-employment in percent of total employment
6B.6 Robustness checks: OLS and quantile regressions between policy measures and DGE-based output informality.
6B.7 Robustness checks: OLS and quantile regressions between policy measures and employment informality.
Half Title
Title Page
Copyright Page
Summary of Contents
Table of Contents
Foreword
Acknowledgments
Authors
Executive Summary
Abbreviations
Chapter 1 Overview
Motivation
Key findings and policy messages
Synopsis
Future research directions
References
PART I: Characteristics of the Informal Economy
Chapter 2 Understanding the Informal Economy: Concepts and Trends
Introduction
Definition of informality
Database of informality measures
Size and evolution of the informal economy
Consistency among the various measures of informality
Cyclical features of the informal economy
Conclusion
Annex 2A: Estimation methodologies
Annex 2B: Tables
References
Chapter 3 Growing Apart or Moving Together? Synchronization of Informal- and Formal-Economy Business Cycles
Introduction
Literature review: Linkages between formal and informal sectors
Data and methodology
Synchronization of formal and informal business cycles
Causal linkages between formal- and informal-economy business cycles
Explaining the cyclicality of the informal sector
Conclusion
Annex 3A: Theory behind the cyclicality of the DGE-based estimates
Annex 3B: Model specifications for measuring co-movement among informality measures
Annex 3C: Causal linkages between formal- and informal-economy business cycles
Annex 3D: Calibrating DGE estimates using survey-based self-employment data
References
PART II: Country and Regional Dimensions
Chapter 4 Lagging Behind: Informality and Development
Introduction
Links between informality and development challenges
Informality and economic correlates
Informality and institutions
Informality and SDGs related to human development
Informality and SDGs related to infrastructure.
Finding the needle in the haystack: The most robust correlates
Conclusion
Annex 4A: Meta-regression analysis
Annex 4B: Regression analysis
Annex 4C: Bayesian model averaging approach
Annex 4D: Tables
References
Chapter 5 Informality in Emerging Market and Developing Economies: Regional Dimensions
Introduction
Informality in EMDEs
East Asia and Pacific
Europe and Central Asia
Latin America and the Caribbean
Middle East and North Africa
South Asia
Sub-Saharan Africa
Conclusion
References
PART III: Policies
Chapter 6 Tackling Informality: Policy Options
Introduction
Data and methodology
Fiscal measures
Other policies
Conclusion
Annex 6A: Policies and informality
Annex 6B: Tables
References
Boxes
2.1 How does informality aggravate the impact of COVID-19?
4.1 Informality and wage inequality
4.2 Casting a shadow: Productivity in formal and informal firms
4.3 Informality, poverty, and income inequality
6.1 Financial development and the informal economy
Figures
1.1 Informality: Main features
1.2 Informality: Extent and evolution
1.3 Formal- and informal-economy business cycles in EMDEs
1.4 Development challenges and informality
1.5 Informality in EMDE regions
1.6 Policies to address challenges of informality
2.1 Informality: Magnitude, variety, and development challenges
B2.1.1 Informality in EMDEs
B2.1.2 Features of the informal sector
B2.1.3 Development challenges
2.2 Informality and development
2.3 Informality in EMDE regions
2.4 Evolution of informality in advanced economies and EMDEs, 1990-2018
2.5 Downward trends in informality, 1990-2018
2.6 Consistency among various informality measures
2.7 Volatility of formal and informal economies, 1990-2018.
2.8 Cyclical features of formal and informal business cycles
2.9 Employment changes during formal and informal business cycles
3.1 Formal- and informal-economy business cycles
3.2 Correlations of informal output with formal output
3.3 Co-movement between formal and informal business cycles
3.4 Coincidence of formal and informal business cycles
3.5 Probability of a recession
3.6 Impact of formal output fluctuations on the informal sector
3C.1 Impact of formal output fluctuations on the informal sector: Alternative instrumental variables
3C.2 Impact of formal output fluctuations on the informal sector: Additional robustness checks
3C.3 Correlations of informal output with formal output: Shares of informal output and employment
3C.4 Impact of formal output fluctuations on shares of output and employment in the informal sector
4.1 Development challenges and informality
B4.1.1 EMDEs: Estimates of informal-formal wage gaps
4.2 Features of informal firms and workers
B4.2.1 Labor productivity in informal firms
B4.2.2 Formal firms facing informal competition
B4.2.3 Labor productivity differential of formal firms with and without informal competition
4.3 Access to finance and public services
4.4 Access to social benefits
B4.3.1 Informality and poverty and income inequality
4.5 Informality and economic correlates
4.6 Informality, fiscal indicators, and institutional quality
4.7 Informality and SDGs related to human development
4.8 Informality and SDGs related to infrastructure
4.9 Results from Bayesian model averaging approach
5.1 Evolution of informality in advanced economies and EMDEs
5.2 Informality in EMDE regions
5.3 Correlates of informality in EMDE regions
5.4 Informality in East Asia and Pacific
5.5 Correlates of informality in East Asia and Pacific.
5.6 Informality in Europe and Central Asia
5.7 Correlates of informality in Europe and Central Asia
5.8 Informality in Latin America and the Caribbean
5.9 Correlates of informality in Latin America and the Caribbean
5.10 Informality in the Middle East and North Africa
5.11 Correlates of informality in the Middle East and North Africa
5.12 Informality in South Asia
5.13 Correlates of informality in South Asia
5.14 Informality in Sub-Saharan Africa
5.15 Correlates of informality in Sub-Saharan Africa
5.16 Informality indicators and entrepreneurial conditions in Sub-Saharan Africa
6.1 Policies to address challenges of informality in EMDEs
B6.1.1 Financial development and informality in EMDEs
B6.1.2 Evolution of financial development in EMDEs
B6.1.3 Evolution of output informality following financial development in EMDEs
6.2 Tax rates and informality in EMDEs
6.3 Firms' tax compliance burdens and informality in EMDEs
6.4 Tax morale and informality in EMDEs
6.5 Government services in EMDEs, 2000-18
6.6 Informality after improvements in government services
6.7 Labor market reforms and informality in EMDEs
6.8 Informality after labor market reforms in EMDEs
6.9 Firm start-up cost and informality in EMDEs
6.10 Governance and informality in EMDEs
6.11 Education and informality in EMDEs
6.12 Access to finance and informality in EMDEs
6A.1 Robustness checks: Evolution of informal output levels following financial development in EMDEs
Tables
2B.1A Summary statistics
2B.1B Summary statistics by country groupings
2B.2 Spearman rank correlations (across countries within individual years)
2B.3 Coincidence of signs of first-differences
2B.4 Volatility of formal and informal economies
2B.5A Cyclical features of recessions in formal and informal economies.
2B.5B Cyclical features of recoveries in formal and informal economies
2B.6A Informal employment during formal and informal business cycles
2B.6B Formal and total employment during formal business cycles
2B.7 Summary of data coverage
2B.8 MIMIC model estimation results, 1993-2018
2B.9 World Values Survey
3C.1 IV-2SLS regression: Baseline results
4D.1 Data: Meta-regression analysis
4D.2 Regression: Meta-regression analysis
4D.3 Labor productivity differential between types of firms
4D.4 Regression: Labor productivity of formal and informal firms
4D.5 Regression: Labor productivity of formal firms facing informal competition
4D.6 Regression: Informality, poverty, and income inequality
4D.7 Regression: Changes in informality and poverty reduction
4D.8 Regression: Changes in informality and improvement in income inequality
4D.9 Data: Bayesian model averaging approach
4D.10 PIP and posterior means (output informality)
4D.11 PIP and posterior means (employment informality)
4D.12 Correlates of employment informality in EMDEs
4D.13 Correlates of informality in EMDEs: MIMIC-based informal activity and WEF index
4D.14 Regression: Developmental challenges and DGE-based output informality in EMDEs
4D.15 Regression: Developmental challenges and self-employment in EMDEs
6B.1 A summary of empirical studies on financial development and informality
6B.2 Data sources of variables used in annex 6A
6B.3 Policy indicators and employment informality
6B.4 Regression results from local-projection models: DGE-based informal output in percent of GDP
6B.5 Regression results from local-projection models: Self-employment in percent of total employment
6B.6 Robustness checks: OLS and quantile regressions between policy measures and DGE-based output informality.
6B.7 Robustness checks: OLS and quantile regressions between policy measures and employment informality.