Informal Economy and the World Bank

Many countries have expressed an interest in the size, performance and motivation of the informal sector, especially where the informal sector provides the livelihood and employment for a critical segment of the population. This essay reviews recen...

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Bibliographic Details
Main Authors:	Benjamin, Nancy, Beegle, Kathleen, Recanatini, Francesca, Santini, Massimiliano
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ACCESS TO SERVICES ACCOUNTING ACTION PLAN AGE GROUP AGRICULTURE BANKING SYSTEM BARRIERS TO ENTRY BILATERAL TRADE BUSINESS CLIMATE BUSINESS DEVELOPMENT BUSINESS DEVELOPMENT SERVICES BUSINESS ENTRY BUSINESS ENVIRONMENT BUSINESS REGISTRATION BUSINESS REGULATIONS BUSINESS SERVICE BUSINESS SERVICES BUYERS CAPABILITY CDS CIVIL SERVICE COMMERCE COMMODITIES COMPETITIVENESS COMPETITORS CONSUMER GOODS CONSUMERS CONTRACTUAL ARRANGEMENTS CUSTOMER BASE CUSTOMS CUSTOMS DECLARATIONS DAY LABORERS DEBT DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DISADVANTAGED GROUPS DISTRIBUTION NETWORK DOMESTIC WORKERS DRIVERS ECONOMIC ACTIVITIES ECONOMIC ACTIVITY ECONOMIC COOPERATION ECONOMIC DEVELOPMENT ECONOMIC PROGRAMS ECONOMIC SURVEYS ELASTICITY ELECTRICAL ENERGY EMPLOYEE EMPLOYMENT EMPLOYMENT GROWTH EMPLOYMENT PROSPECTS EMPLOYMENT STATUS ENTERPRISE SURVEY ENTERPRISE SURVEYS ENTREPRENEURS ENTREPRENEURSHIP ESTIMATED WAGE PREMIUM EXPANSION EXPORTS FIRM ENTRY FIRM LEVEL FIRM PERFORMANCE FIRM PRODUCTIVITY FIRM SIZE FIRM SURVEYS FIRM-LEVEL ANALYSIS FLOW OF GOODS FLOW OF INFORMATION FOREIGN TRADE FORMAL SECTOR WAGE GDP GDP PER CAPITA GLOBAL ECONOMY GOVERNMENT REVENUES GROWTH POTENTIAL HOUSEHOLD ENTERPRISE HOUSEHOLD ENTERPRISES HOUSEHOLD SURVEYS HUMAN CAPITAL IMPORT QUOTAS INCOME INCOME LEVELS INFORMAL ECONOMY INFORMAL EMPLOYMENT INFORMAL SECTOR INFORMAL SECTOR WORKERS INFORMATION GAP INTERNATIONAL COMPETITIVENESS JOB CREATION JOBS LABOR FORCE LABOR MARKET LABOR MIGRATION LABOR MOBILITY LABOR ORGANIZATION LABOR PRODUCTIVITY LABOR REGULATIONS LABOUR LAWS LDCS LEGAL ENVIRONMENT LEVEL PLAYING FIELD LICENSE LOCAL GOVERNMENT MANUFACTURING MARGINAL PRODUCTS MARKET PLACES MARKET RESEARCH MICROENTERPRISES MIDDLE INCOME COUNTRIES NATIONAL ECONOMIES NATIONAL ECONOMY NETWORKS NON-FARM EMPLOYMENT ONE-STOP SHOP OPEN ACCESS PAYMENT OF TAXES PENSIONS PERFORMANCES PRIMARY OBJECTIVE PRIVATE FIRMS PRIVATE SECTOR PRIVATE SECTOR DEVELOPMENT PRIVATE SECTOR JOBS PRIVATE SECTOR WAGE PRODUCTION FUNCTION PRODUCTIVE FIRMS PRODUCTIVITY DIFFERENTIAL PRODUCTIVITY GAP PRODUCTIVITY GROWTH PROFIT MARGINS PROFITABILITY PROPERTY RIGHTS PROTECTING WORKERS PUBLIC AGENCIES PUBLIC EMPLOYMENT PUBLIC SECTOR EMPLOYMENT PUBLIC SECTOR JOB PUBLIC SERVICES PUBLIC UTILITIES REGISTRIES REGULATORY BURDEN REGULATORY ENVIRONMENT REGULATORY FRAMEWORKS RESULT RESULTS RETAIL TRADE RURAL URBAN MIGRATION SALARIED WORKERS SAVINGS SCALE ENTERPRISES SELF EMPLOYMENT SHOP SKILLED LABOR SKILLS DEVELOPMENT SMALL BUSINESSES SMALL ENTERPRISES SMALL FIRM SMALL FIRMS SME SOCIAL SERVICES SOCIOLOGISTS STATE INTERVENTION SUPPLIER SUPPLIERS SUPPLY CHAIN SUPPLY NETWORKS TARGETS TAX CAPACITY TAX COMPLIANCE TAX REVENUES TAXATION TEMPORARY WORKERS TOTAL FACTOR PRODUCTIVITY TOTAL OUTPUT TRADE FACILITATION TRADE FLOWS TRADE POLICIES TRADE POLICY TRAINING PROGRAM TRAINING PROGRAMS TRANSPORT UNEMPLOYED UNEMPLOYMENT UNFAIR COMPETITION UNPAID FAMILY WORKERS URBANIZATION USES VALUE ADDED VENDORS VOCATIONAL TRAINING WAGE EMPLOYMENT WAGE PREMIUM WEALTH WEB WORKER WORKERS WORKING CONDITIONS WORKING POOR YOUTH EMPLOYMENT
Online Access:	http://documents.worldbank.org/curated/en/2014/04/19553386/informal-economy-world-bank http://hdl.handle.net/10986/18799

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Summary:	Many countries have expressed an interest in the size, performance and motivation of the informal sector, especially where the informal sector provides the livelihood and employment for a critical segment of the population. This essay reviews recent literature, methodologies, and relevant Bank studies as a way to share information with country teams interested in expanding their knowledge of the informal sector and related policy debates. Research in a number of regions points to four main areas where development policy can be improved by taking the informal sector into account. First, improvements should be made along a continuum; the heterogeneity among informal firms points to different policy approaches for different types of firms. Second, there should be public-private collaboration on mutual reforms. Many efforts to improve firm performance focus on elements of the production function (labor skills, credit) while treating government mainly as a cost (taxes, cost of compliance with regulations). Yet research reveals that many characteristics of the public regime strongly influence the decisions of firms regarding informality. Third, research indicates a strong relation between basic skills and labor outcomes, particularly in the informal sector, despite the sector's lower average returns. Research also indicates the benefits of targeted training programs. Business services programs have a decidedly mixed record, yet ongoing research is refining results on what works best. Fourth, informal trade is pervasive in developing countries and the networks developed in informal trade -- wholesalers, credit suppliers and money-changers, transporters -- are a strong presence in the informal sector. Yet these kinds of complex and nontransparent trading systems can be discouraging to foreign investors and can otherwise undermine trade policy and the international competitiveness of developing countries. The paper concludes with recommendations.

Informal Economy and the World Bank

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