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Informality : exit and exclusion (English)

Informality: exit and exclusion analyzes informality in Latin America, exploring root causes and reasons for and implications of its growth. The authors use two distinct but complementary lenses: informality driven by exclusion from state benefits or the circuits of the modern economy, and driven by voluntary 'exit' decisions resulting from private cost-benefit calculations that lead workers and firms to opt out of formal institutions. They find both lenses have considerable explanatory power to understand the causes and consequences of informality in the region. Informality: exit and exclusion concludes that reducing informality levels and overcoming the 'culture of informality' will require actions to increase aggregate productivity in the economy, reform poorly designed regulations and social policies, and increase the legitimacy of the state by improving the quality and fairness of state institutions and policies. Although the study focuses on Latin America, its analysis, approach, and conclusions are relevant for all developing countries.

Details

  • Author

    Arias Diaz,Omar S., Bosch Mossi,Mariano, Fajnzylber,Pablo, Maloney,William F., Mason,Andrew D., Perry, Guillermo E., Saavedra Chanduvi,Jaime

  • Document Date

    2007/01/01

  • Document Type

    Publication

  • Report Number

    40008

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    World,

  • Region

    The World Region,

  • Disclosure Date

    2010/04/20

  • Disclosure Status

    Disclosed

  • Doc Name

    Informality : exit and exclusion

  • Keywords

    Departamento Administrativo Nacional de Estadistica;equal pay for equal work;impact of changes in cost;earned income tax credit;access to social protection;corruption in tax administration;central government tax revenue;Massachusetts Institute of Technology;social risk management instrument;small and medium enterprise;formal sector;salaried worker;informal sector;social security contribution;social protection program;social protection system;purchasing power parity;social security system;per capita income;social security coverage;informal labor market;labor market reform;public social protection;informal employment;labor force participation;share of labor;health insurance coverage;Social Protection Benefits;average tax rate;labor market legislation;national poverty line;social protection reform;social protection policy;health care service;lack of portability;taxes and labour;case of health;human capital constraint;number of workers;labor market dynamic;social security institutions;point of entry;formal social security;underreporting of tax;informal labor arrangements;contributory social security;health insurance plan;unpaid family worker;long-term economic growth;benefits of participation;real exchange rate;economically active population;flexible work arrangement;total tax revenue;drag on growth;shed more light;Rule of Law;informal worker;average treatment effect;protection of workers;firm size;independent worker;urban employment;social contract;job satisfaction;household survey;employment size;older worker;labor productivity;pension coverage;Tax Evasion;government failure;firm dynamic;hourly earnings;firm owner;benefit analysis;labor legislation;estimate impact;state capture;pension scheme;market failure;Job Creation;business cycle;labor protection;odds ratio;health coverage;social insurance;market segmentation;salaried employment;comparative advantage;manufacturing sector;legal definition;Tax Compliance;firm productivity;Informal Jobs;payroll tax;negative externality;health treatment;domestic employees;family education;salaried relationship;conceptual issue;old-age security;tax burden;street vendor;taxi driver;monetary compensation;security program;insurance market;social program;informal mechanism;observed increase;holding pattern;legal framework;modern economy;Regional Studies;unskilled worker;urban neighborhood;household worker;regional data;cost-benefit analysis;rural area;driving force;income quintile;constitutional reform;social spending;enforcing authority;formal contracts;analytical tool;government regulation;unpaid worker;married woman;statistical technique;Universal Service;informal groups;firm ownership;aggregate productivity;entry regulation;Public Spending;conceptual framework;informal firms;employment effect;working condition;coverage rate;collaborative effort;social assistance;health expenditure;cumulative distribution;government effectiveness;local taxation;Homebased Work;industrialized country;Industrialized countries;pension reform;employment status;property right;private security;Tax Reform;applicable law;subsidiary right;weak enforcement;earnings gain;economic sector;occupational group;labor income;relative earnings;employment growth;size distribution;policy package;Tax Exemption;household head;secondary level;tax structure;public intervention;pension system;popular measure;court system;public policy;density function;federal level;high wage;nominal wage;Employment Sector;marital status;self-employment rate;regression coefficient;labor regulation;private gain;statistical agency;benefit calculation;private cost;payroll contribution;voluntary exit;ample evidence;detection risk;regulatory analysis;Young Workers;current consumption;labor statistic;state pension;labor taxes;

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Citation

Arias Diaz,Omar S. Bosch Mossi,Mariano Fajnzylber,Pablo Maloney,William F. Mason,Andrew D. Perry, Guillermo E. Saavedra Chanduvi,Jaime

Informality : exit and exclusion (English). World Bank Latin American and Caribbean studies Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/326611468163756420/Informality-exit-and-exclusion