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Measuring the Informal Economy in Latin America and the Caribbean

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  • Guillermo Javier Vuletin

Abstract

This paper estimates the size of the informal economy for 32 mainly Latin American and Caribbean countries in the early 2000s. Using a structural equation modeling approach, we find that a stringent tax system and regulatory environment, higher inflation, and dominance of the agriculture sector are key factors in determining the size of the informal economy. The results also confirm that a higher degree of informality reduces labor unionization, the number of contributors to social security schemes, and enrollment rates in education.

Suggested Citation

  • Guillermo Javier Vuletin, 2008. "Measuring the Informal Economy in Latin America and the Caribbean," IMF Working Papers 08/102, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:08/102
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. de Vries, Gaaitzen J. & Erumban, Abdul A. & Timmer, Marcel P. & Voskoboynikov, Ilya & Wu, Harry X., 2012. "Deconstructing the BRICs: Structural transformation and aggregate productivity growth," Journal of Comparative Economics, Elsevier, vol. 40(2), pages 211-227.
    2. Leandro Medina & Friedrich Schneider, 2017. "Shadow Economies around the World: New Results for 158 Countries over 1991-2015," CESifo Working Paper Series 6430, CESifo Group Munich.
    3. Richard M. Bird & Michael Smart, 2012. "Financing Social Expenditures in Developing Countries: Payroll or Value Added Taxes?," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1206, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    4. Friedrich Schneider, 2014. "Outside the State - the Shadow Economy and Shadow Economy Labor Force," CESifo Working Paper Series 4829, CESifo Group Munich.
    5. Eduardo Lora & Johanna Fajardo-González, 2016. "Employment and taxes in Latin America: An empirical study of the effects of payroll, corporate income and value-added taxes on labor outcomes," REVISTA CUADERNOS DE ECONOMÍA, UNIVERSIDAD NACIONAL DE COLOMBIA -FCE - CID, vol. 35(Especial ), pages 75-117, January.
    6. Macias, Jose Brambila & Cazzavillan, Guido, 2009. "The dynamics of parallel economies. Measuring the informal sector in Mexico," Research in Economics, Elsevier, vol. 63(3), pages 189-199, September.
    7. Dan Andrews & Aida Caldera Sánchez & Åsa Johansson, 2011. "Towards a Better Understanding of the Informal Economy," OECD Economics Department Working Papers 873, OECD Publishing.
    8. Luisanna Onnis & Patrizio Tirelli, 2011. "Institutions, policies and economic development. What are the causes of the shadow economy?," Working Papers 206, University of Milano-Bicocca, Department of Economics, revised Mar 2011.
    9. Yasser Abdih & Leandro Medina, 2013. "Measuring the Informal Economy in the Caucasus and Central Asia," IMF Working Papers 13/137, International Monetary Fund.
    10. Santos-Pérez, Rubén, 2016. "Estimación de la economía informal para México mediante un método monetario, 1970-2012," eseconomía, Escuela Superior de Economía, Instituto Politécnico Nacional, vol. 11(45), pages 71-103, Segundo s.
    11. Pokorny, Benno & de Jong, Wil & Godar, Javier & Pacheco, Pablo & Johnson, James, 2013. "From large to small: Reorienting rural development policies in response to climate change, food security and poverty," Forest Policy and Economics, Elsevier, vol. 36(C), pages 52-59.
    12. José Brambila Macias & Guido Cazzavillan, 2010. "Modeling the informal economy in Mexico:a structural equation approach," Journal of Developing Areas, Tennessee State University, College of Business, vol. 44(1), pages 345-365, September.
    13. Jos� Brambila Macias & Guido Cazzavillan, 2008. "The Dynamics of Parallel Economies. Measuring the Informal Sector in M�xico," Working Papers 2008_42, Department of Economics, University of Venice "Ca' Foscari".
    14. Vargas, Jose P Mauricio, 2012. "To be or not to be informal?: A Structural Simulation," MPRA Paper 41290, University Library of Munich, Germany.

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