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Understanding Informality

Author

Listed:
  • Ceyhun Elgin

    (Columbia University and Bogazici University)

  • M. Ayhan Kose

    (World Bank, Prospects Group; Brookings Institution; CEPR; and CAMA)

  • Franziska Ohnsorge

    (World Bank, Prospects Group; CEPR; and CAMA)

  • Shu Yu

    (World Bank)

Abstract

This paper introduces a comprehensive database of informal economic activity. The database focuses on measures that have strong cross-country and over time coverage: it includes both model-based and survey-based measures of informality and covers more than 160 economies for the period 1990-2018. The paper illustrates two applications of the database. First, it distills stylized facts of informal activity, including its declining trend and pervasiveness in emerging market and developing economies (EMDEs). Second, it documents the cyclical features of the informal economy. Overall, informal economy recessions (recoveries) do not differ significantly from those of formal economy. Like formal-economy business cycles, informal-economy business cycles tend to be shallower in advanced economies than in EMDEs. Informal employment in both advanced economies and EMDEs appears to be largely acyclical.

Suggested Citation

  • Ceyhun Elgin & M. Ayhan Kose & Franziska Ohnsorge & Shu Yu, 2021. "Understanding Informality," Koç University-TUSIAD Economic Research Forum Working Papers 2114, Koc University-TUSIAD Economic Research Forum.
  • Handle: RePEc:koc:wpaper:2114
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    More about this item

    Keywords

    Informal economy; self-employment; employment; output; business cycles.;
    All these keywords.

    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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