Publication:
Informality Trends and Cycles

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dc.contributor.authorLoayza, Norman V.
dc.contributor.authorRigolini, Jamele
dc.date.accessioned2012-06-22T20:10:22Z
dc.date.available2012-06-22T20:10:22Z
dc.date.issued2006-12
dc.description.abstractThis paper studies the trends and cycles of informal employment. It first presents a theoretical model where the size of informal employment is determined by the relative costs and benefits of informality and the distribution of workers' skills. In the long run, informal employment varies with the trends in these variables, and in the short run it reacts to accommodate transient shocks and to close the gap that separates it from its trend level. The paper then uses an error-correction framework to examine empirically informality's long- and short-run relationships. For this purpose, it uses country-level data at annual frequency for a sample of industrial and developing countries, with the share of self-employment in the labor force as the proxy for informal employment. The paper finds that, in the long run, informality is larger in countries that have lower GDP per capita and impose more costs to formal firms in the form of more rigid business regulations, less valuable police and judicial services, and weaker monitoring of informality. In the short run, informal employment is found to be counter-cyclical for the majority of countries, with the degree of counter-cyclicality being lower in countries with larger informal employment and better police and judicial services. Moreover, informal employment follows a stable, trend-reverting process. These results are robust to changes in the sample and to the influence of outliers, even when only developing countries are considered in the analysis.en
dc.identifierhttp://documents.worldbank.org/curated/en/2006/12/7245835/informality-trends-cycles
dc.identifier.doi10.1596/1813-9450-4078
dc.identifier.urihttps://hdl.handle.net/10986/8855
dc.languageEnglish
dc.language.isoen_US
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper; No. 4078
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectABSOLUTE DIFFERENCE
dc.subjectACTIVE LABOR
dc.subjectADVERSE SELECTION
dc.subjectAGGREGATE OUTPUT
dc.subjectBUSINESS CYCLE
dc.subjectCOMPARATIVE ANALYSIS
dc.subjectCOUNTRY CHARACTERISTICS
dc.subjectCOUNTRY DUMMY
dc.subjectCOUNTRY-BY-COUNTRY BASIS
dc.subjectCUMULATIVE FUNCTION
dc.subjectDATA SET
dc.subjectDEPENDENT VARIABLE
dc.subjectDEVELOPED COUNTRIES
dc.subjectDEVELOPING COUNTRIES
dc.subjectDEVELOPMENT ECONOMICS
dc.subjectDISCUSSIONS
dc.subjectDISEQUILIBRIUM
dc.subjectECONOMIC ACTIVITY
dc.subjectECONOMIC GROWTH
dc.subjectELASTICITY
dc.subjectEMPIRICAL ANALYSIS
dc.subjectEMPIRICAL EVIDENCE
dc.subjectEMPIRICAL FINDINGS
dc.subjectEMPIRICAL MODEL
dc.subjectEMPIRICAL SECTION
dc.subjectEMPLOYMENT GROWTH
dc.subjectEMPLOYMENT RATE
dc.subjectENTRY COSTS
dc.subjectEQUILIBRIUM
dc.subjectEQUILIBRIUM LEVEL
dc.subjectEXOGENOUS VARIABLE
dc.subjectEXPLANATORY POWER
dc.subjectEXPLANATORY VARIABLE
dc.subjectGDP
dc.subjectGDP PER CAPITA
dc.subjectGOVERNMENT EXPENDITURES
dc.subjectGROSS INCOME
dc.subjectGROWTH RATE
dc.subjectINCOME
dc.subjectINCOME LEVELS
dc.subjectINEQUALITY
dc.subjectINFORMAL ECONOMIES
dc.subjectINFORMAL ECONOMY
dc.subjectINFORMAL EMPLOYMENT
dc.subjectINFORMAL LABOR MARKETS
dc.subjectINFORMAL SECTOR
dc.subjectINTEREST RATES
dc.subjectLABOR FORCE
dc.subjectLABOR MARKET
dc.subjectLABOR ORGANIZATION
dc.subjectLABOR TURNOVER
dc.subjectLATIN AMERICAN
dc.subjectLONG-RUN EQUILIBRIUM
dc.subjectLONG-RUN GROWTH
dc.subjectMACROECONOMIC SHOCKS
dc.subjectMARGINAL COST
dc.subjectMIDDLE INCOME COUNTRIES
dc.subjectMINIMUM WAGE
dc.subjectMINIMUM WAGES
dc.subjectMONETARY ECONOMICS
dc.subjectMORAL HAZARD
dc.subjectNATIONAL INCOME
dc.subjectNEGATIVE SHOCKS
dc.subjectNEGATIVE SIGN
dc.subjectOPPORTUNITY COST
dc.subjectPER CAPITA GROWTH
dc.subjectPOLICY RESEARCH
dc.subjectPOLITICAL ECONOMY
dc.subjectPOSITIVE SHOCKS
dc.subjectPREVIOUS SECTION
dc.subjectPRIVATE AGENTS
dc.subjectPRODUCTIVITY
dc.subjectPRODUCTIVITY DIFFERENTIAL
dc.subjectPRODUCTIVITY INCREASES
dc.subjectPRODUCTIVITY LEVEL
dc.subjectPUBLIC ECONOMICS
dc.subjectPUBLIC POLICY
dc.subjectPUBLIC SERVICES
dc.subjectREAL EXCHANGE RATE
dc.subjectRELATIVE EARNINGS
dc.subjectSELF EMPLOYED
dc.subjectSELF EMPLOYED WORKERS
dc.subjectSELF EMPLOYMENT
dc.subjectSERIES DATA
dc.subjectSERIES OBSERVATIONS
dc.subjectSKILL LEVEL
dc.subjectSMALL MANUFACTURING
dc.subjectTAXATION
dc.subjectTOTAL EMPLOYMENT
dc.subjectTOTAL WORKERS
dc.subjectWORK IN PROGRESS
dc.subjectWORKER
dc.subjectWORKERS
dc.subjectWORKING
dc.titleInformality Trends and Cyclesen
dspace.entity.typePublication
okr.crosscuttingsolutionareaJobs
okr.crossref.titleInformality Trends And Cycles
okr.date.doiregistration2025-04-10T10:01:56.245333Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/2006/12/7245835/informality-trends-cycles
okr.globalpracticeMacroeconomics and Fiscal Management
okr.globalpracticeSocial Protection and Labor
okr.globalpracticePoverty
okr.guid254671468141896360
okr.identifier.doi10.1596/1813-9450-4078
okr.identifier.externaldocumentum000016406_20061205153005
okr.identifier.internaldocumentum7245835
okr.identifier.reportWPS4078
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2006/12/05/000016406_20061205153005/Rendered/PDF/wps4078.pdfen
okr.topicEconomic Theory and Research
okr.topicSocial Protections and Labor::Labor Markets
okr.topicWork and Working Conditions
okr.topicSocial Protections and Labor::Labor Standards
okr.topicPoverty Reduction::Inequality
okr.topicMacroeconomics and Economic Growth
okr.unitDevelopment Research Group (DECRG)
okr.volume1 of 1
relation.isAuthorOfPublicationb51f7805-9174-58dc-a585-0ca1b7edbebc
relation.isAuthorOfPublication.latestForDiscoveryb51f7805-9174-58dc-a585-0ca1b7edbebc
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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