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

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  • Colin C. WILLIAMS

Abstract

Given the prevalence of informality, this article proposes a typology for classifying countries by the extent and nature of employment in the informal economy, rather than by the composition of their formal economies. The author analyses ILO data on employment in the informal economy in 36 developing countries, and shows that there is a significant correlation between cross-national variations in the degree and intensity of informalization and cross-national variations in social and economic indicators such as levels of GNP per capita, corruption, poverty, taxation and social contributions. The article concludes by discussing implications for theory and policy.

Suggested Citation

  • Colin C. WILLIAMS, 2015. "Out of the shadows: Classifying economies by the extent and nature of employment in the informal economy," International Labour Review, International Labour Organization, vol. 154(3), pages 331-351, September.
    • Handle: RePEc:bla:intlab:v:154:y:2015:i:3:p:331-351
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    File URL: http://hdl.handle.net/10.1111/j.1564-913X.2015.00245.x
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    References listed on IDEAS

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    1. Lars P. Feld & Friedrich Schneider, 2010. "Survey on the Shadow Economy and Undeclared Earnings in OECD Countries," German Economic Review, Verein für Socialpolitik, vol. 11(2), pages 109-149, May.
    2. Andreas Buehn & Friedrich Schneider, 2012. "Shadow economies around the world: novel insights, accepted knowledge, and new estimates," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(1), pages 139-171, February.
    3. Ted London & Stuart L Hart, 2004. "Reinventing strategies for emerging markets: beyond the transnational model," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 35(5), pages 350-370, September.
    4. Friedrich Schneider (ed.), 2008. "The Economics of the Hidden Economy," Books, Edward Elgar Publishing, volume 0, number 3074.
    5. Colin C. WILLIAMS & Mark A. LANSKY, 2013. "Informal employment in developed and developing economies: Perspectives and policy responses," International Labour Review, International Labour Organization, vol. 152(3-4), pages 355-380, December.
    6. Yamada, Gustavo, 1996. "Urban Informal Employment and Self-Employment in Developing Countries: Theory and Evidence," Economic Development and Cultural Change, University of Chicago Press, vol. 44(2), pages 289-314, January.
    7. Friedrich Schneider & Andreas Buehn & Claudio Montenegro, 2010. "New Estimates for the Shadow Economies all over the World," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 443-461.
    8. Olumide TAIWO, 2013. "Employment choice and mobility in multi-sector labour markets: Theoretical model and evidence from Ghana," International Labour Review, International Labour Organization, vol. 152(3-4), pages 469-492, December.
    9. Colin C. Williams, 2013. "Evaluating cross-national variations in the extent and nature of informal employment in the European Union," Industrial Relations Journal, Wiley Blackwell, vol. 44(5-6), pages 479-494, November.
    10. Guillermo E. Perry & William F. Maloney & Omar S. Arias & Pablo Fajnzylber & Andrew D. Mason & Jaime Saavedra-Chanduvi, 2007. "Informality : Exit and Exclusion," World Bank Publications - Books, The World Bank Group, number 6730, December.
    11. Friedrich Schneider (ed.), 2011. "Handbook on the Shadow Economy," Books, Edward Elgar Publishing, number 13432.
    12. Pauline Dibben & Colin C. Williams, 2012. "Varieties of Capitalism and Employment Relations: Informally Dominated Market Economies," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 51, pages 563-582, April.
    13. Uma RANI & Patrick BELSER & Martin OELZ & Setareh RANJBAR, 2013. "Minimum wage coverage and compliance in developing countries," International Labour Review, International Labour Organization, vol. 152(3-4), pages 381-410, December.
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    Cited by:

    1. Roberto Dell'Anno, 2022. "Theories and definitions of the informal economy: A survey," Journal of Economic Surveys, Wiley Blackwell, vol. 36(5), pages 1610-1643, December.
    2. Raluca Dimitriu, 2017. "The new Romanian regulation of undeclared labour," Juridical Tribune (Tribuna Juridica), Bucharest Academy of Economic Studies, Law Department, vol. 7(2), pages 52-61, December.
    3. Colin C. Williams & Abbi M. Kedir, 2017. "Starting-up unregistered and firm performance in Turkey," International Entrepreneurship and Management Journal, Springer, vol. 13(3), pages 797-817, September.
    4. Andrea Fracasso & Giuseppe Vittucci Marzetti & Diego Coletto, 2018. "Informal economy and extractive institutions," Review of Economics and Institutions, Università di Perugia, vol. 9(1).
    5. Mr. Ben Kelmanson & Koralai Kirabaeva & Leandro Medina & Borislava Mircheva & Jason Weiss, 2019. "Explaining the Shadow Economy in Europe: Size, Causes and Policy Options," IMF Working Papers 2019/278, International Monetary Fund.

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