Working Paper: CEPR ID: DP16497
Authors: Ceyhun Elgin; M. Ayhan Kose; Franziska Ohnsorge; Shu Yu
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.
Keywords: informal economy; self-employment; employment; output; business cycles
JEL Codes: E26; E32; J46; O17
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| informal economy output and employment (E26) | economic development (O29) |
| larger informal sectors (J46) | lower access to finance (G21) |
| larger informal sectors (J46) | lower productivity (O49) |
| economic development (O29) | informal economy output and employment (E26) |
| informal employment (J46) | stability during economic fluctuations (E32) |
| informal economy recessions and recoveries (E26) | formal economy recessions and recoveries (E26) |