Informality Exit and Exclusion

by Fajnzylber, Pablo; Perry, Guillermo E.; Maloney, William F.; Arias, Omar; Mason, Andrew; Saavedra-Chanduvi, Jaime

• ISBN13: 9780821370926
• ISBN10: 0821370928
• Format: Paperback
• Copyright: 2007-05-16
• Publisher: World Bank Publications

Summary

Informality is a manifestation of a flawed relationship between citizens and their state. While the term means different things to different people, it almost always has negative connotations-including inferior working conditions, low productivity businesses, unfair competition, and disrespect for the rule of law. It is not surprising then that the rise observed in informality in Latin American and Caribbean countries over recent decades has garnered attention as a potential brake on improvements in growth and social welfare, and as a force corrosive to the integrity of society.

Table of Contents

Foreword	p. xi
Acknowledgments	p. xiii
Abbreviations	p. xv
Overview: Informality: Exit and Exclusion	p. 1
The razon de ser of the informal sector: Adding exit to exclusion	p. 1
Workers: A mix of opting out and exclusion	p. 4
Firms: Little gain, high costs, or weak enforcement?	p. 9
Need for more effective and legitimate institutions	p. 12
Summing up: Policy implications of the report	p. 13
Informality and the development agenda	p. 19
Note	p. 19
References	p. 19
The Informal Sector: What Is It, Why Do We Care, and How Do We Measure It?	p. 21
Introduction: What is informality?	p. 21
Informality and the relationship between the individual and the state	p. 22
Three margins of informality	p. 25
Measuring the informal sector	p. 28
Correlations among measures and trends over time	p. 35
Conclusions	p. 37
Annex	p. 39
Notes	p. 39
References	p. 40
The Razon de Ser of the Informal Worker	p. 43
Informal work: Adding exit to exclusion	p. 43
The sectors of informal labor: Characteristics and dynamics	p. 48
Motivations for participation in informal work	p. 62
Conclusions	p. 74
Notes	p. 74
References	p. 75
Informality, Earnings, and Welfare	p. 79
Compensating differentials, comparative advantage, and informal work	p. 80
The question of equal pay for equal work in the informal and formal sectors	p. 85
Informality and self-rated welfare	p. 92
Conclusions and policy implications	p. 98
Notes	p. 99
References	p. 99
The Informal Labor Market in Motion: Dynamics, Cycles, and Trends	p. 101
Informality through the lens of gross labor force dynamics	p. 102
Drivers of the increase in informality	p. 112
Conclusion	p. 125
Notes	p. 127
References	p. 128
Microfirm Dynamics and Informality	p. 133
Conceptual framework: Firm dynamics and institutional development	p. 134
Microfirm dynamics in Latin America	p. 140
Informality among microfirms	p. 148
Conclusions	p. 153
Notes	p. 154
References	p. 154
Informality, Productivity, and the Firm	p. 157
Informality among registered firms	p. 158
Firm-level determinants of informality	p. 160
Impact of informality on firm productivity and economic growth	p. 171
Conclusions	p. 175
Notes	p. 177
References	p. 177
Informality, Social Protection, and Antipoverty Policies	p. 179
Informality and social protection: Why policy makers should care	p. 179
The state of social protection in Latin America and the Caribbean	p. 184
Private risk management and rationale for public social protection	p. 190
Challenges for social protection in the face of informality	p. 193
Reengineering social protection to protect all citizens	p. 199
Potential costs of social protection reform: Financing essential cover	p. 204
Managing the transition from here to there	p. 206
Conclusion	p. 208
Notes	p. 210
References	p. 211
The Informal Sector and the State: Institutions, Inequality, and Social Norms	p. 215
Social norms, the state, and informality	p. 217
The tax side of the social contract in Latin America	p. 223
Inequality, taxes, and transfers	p. 235
Informality: A reflection of a broken social contract?	p. 239
Conclusions	p. 244
Notes	p. 245
References	p. 246
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