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In the years 2003–2008, the Russian economy experienced a period of strong and sustained growth, which was accompanied by large worker turnover and rising informality. We investigate whether the burden of informality falls disproportionately on job separators (displaced workers and quitters) in the Russian labor market in the form of informal employment and undeclared wages in formal jobs. We also pursue the issues whether displaced workers experience more involuntary informal employment than workers who quit and whether informal employment persists. We find a strong positive link between separations and informal employment as well as shares of undeclared wages in formal jobs. Our results also show that displacement entraps some of the workers in involuntary informal employment. Those who quit, in turn, experience voluntary informality for the most part, but there seems a minority of quitting workers who end up in involuntary informal jobs. This scenario does not fall on all separators but predominantly on those with low human capital. Finally, informal employment is indeed persistent since separating from an informal job considerably raises the probability to be informal in the subsequent job.

In this chapter, we aim to illustrate some of the forms taken by informal employment in the global south and how these can best be understood by adopting a wider analytical lens than has been applied in much of the precarious employment literature. We draw on the findings of a recent study of the working conditions of urban informal workers from 10 cities in the global south. The study consisted of focus groups (15 in each city) conducted through the framework of a participatory informal economy appraisal as well as a survey of 1,957 home-based workers, street vendors, and waste pickers. Our findings illustrate a number of ways in which these three groups of informal workers are embedded within the formal economy. While they are not engaged in wage employment, they play subordinate roles to both formal sector firms within global production networks and unequal production relations and to the state through, inter alia, constrained access to public spaces and regulation. In order to interpret these findings, we apply Agarwala’s (2009) “relational” lens to demonstrate how risks and costs are transferred to workers who constitute the “real economy” in much of the global south. Given the often disguised connections between informal employment and the formal economy, this approach also provides a bridge to understanding precarious working conditions and the effects of globalization outside of the industrialized north.

This study investigates the formal/informal employment earnings gap in Turkey. We focus on the earnings differentials that can be explained by observable characteristics and unobservable time-invariant individual heterogeneity. We first, estimate the standard Mincer earnings equations using ordinary least squares (OLS), controlling for individual, household, and job characteristics. Next we use, panel data and the quantile regression (QR) techniques in order to account for unobserved factors which might affect the earnings and the intrinsic heterogeneity within formal and informal sectors. OLS results confirm the existence of an informal sector penalty almost half of which is explained by observable variables. We find that formal-salaried workers are paid significantly higher than their informal counterparts and of the self-employed confirming the heterogeneity within the informal employment. QR results show that pay differentials are not uniform along the earnings distribution. In contrast to the mainstream literature which views informal self-employment as the upper-tier and wage-employment as the lower-tier, we find that self-employment corresponds to the lower-tier in the Turkish labor market. Finally, fixed effects estimation indicates that unobserved individual characteristics combined with controls for observable characteristics explain the pay differentials between formal and informal employment entirely in the total and the female sample. However, informal sector penalty persists in the male sample.

The purpose of this paper is to use a subjective well-being approach to address a long-standing debate on informal employment: whether it is a low-quality or a high-quality option. The literature generally refers to these options as exclusion vs exit. Policy makers often assume that informal employment constitutes a low-quality option.

The paper relies on a mid-size survey from Mexico as well as on a group of subjective well-being indicators to explore whether people in informal employment display lower or higher well-being. Information on life satisfaction, job satisfaction, and satisfaction with some job-related attributes, satisfaction in other domains of life, and experiences of well-being is used to assess the situation of those in informal employment.

The empirical research finds that there are substantial differences in the socio-demographic and economic characteristics of those in formal and in informal employment. These differences in the population characteristics partially explain differences in subjective well-being. However, once these differences are taken into consideration there is little difference in subjective well-being between informal workers and formal ones. Hence, the paper concludes that in comparison with people in formal employment, informal employment is neither associated with a better life nor with a worse life. Neither the exclusion nor the exit view of informality is supported by the empirical evidence.

Contrary to common perceptions, informal employment does not constitute a low-quality option in the subjective well-being arena. This is a powerful message for policy makers who wish to maximize the employment-related well-being of its citizens. There may well be legitimate policy reasons why the degree of informality should be reduced. However, based on the findings in the Mexican context, the paper stipulates that reducing informal employment primarily on the grounds of greater general unhappiness is not one of them.

The paper contributes to the relevant literature by studying informality from a subjective well-being perspective, which extends much beyond job satisfaction. No research on informal employment has previously used such a large set of subjective well-being indicators comprising variables such as life satisfaction, satisfaction in domains of life, and experiences of well-being.

This paper, the first one to use individual-level Turkish panel data, examines the labor market transitions in Turkey along the formal/informal employment divide. The purpose of this paper is to contribute to the limited body of empirical evidence available on mobility and informality in the Turkish labor market.

Toward this end, the authors use Turkish income and Living Conditions Survey panel data for 2006, 2007, 2008 and 2009 to compute the Markov transition probabilities of individuals moving across six different labor market states: formal-salaried (FS), informal-salaried, formal self-employed, informal self-employed, unemployed and inactive. In order to examine the nature of mobility patterns in more detail, the authors then estimate six multinomial logit models individually for each transition adopting a number of individual and employment characteristics as explanatory variables.

The authors find evidence that mobility patterns are fairly similar across different time spans, the probability of remaining in initial state is higher than the probability of transition into another state for all the labor market states, except for unemployment, there is only very limited mobility into the FS state. Gender, education and sector of economic activity are observed to display significant effects on mobility patterns. The results reveal several relationships between the covariates and likelihood of variant transitions.

This study provides a comprehensive and detailed diagnosis of the Turkish labor market. The market is observed to display a rather static structure throughout the period considered. The results indicate that a well recognition of underlying dynamics may help policy makers to produce various effective tools for addressing informality.

First study to analyze labor market mobility across formal/informal sectors using newly available panel data.

During the transition from socialist to post-socialist regimes, many Central and Eastern Europe societies have developed a broad sector of informal work. This development has caused substantial economic and social problems. The paper aims to discuss these issues.

This paper aims to answer two questions regarding European countries with a relatively weak economy and welfare state: what are the differences in the social characteristics between workers in formal and informal employment? And how might they be explained? According to the main assumption, a key reason why people work in undeclared employment in such countries is that they are in particularly vulnerable positions in the labour market. This paper uses the example of Moldova. The empirical study is based on a unique survey data set from the National Statistical Office of Moldova covering formal and informal employment.

The findings show that, in informal employment, workers in rural areas, workers with a low level of education, young workers and older workers – in the final years of their careers and after the age of retirement – are over-represented. It seems that a significant reason why these workers are often engaged in informal employment is the lack of alternatives in the labour market, particularly in rural areas, compounded by limited social benefits from unemployment benefits and pensions.

Research about social differences between workers in formal and informal employment in the countries of the European periphery is rare. This paper makes a new contribution to the theoretical debate and research regarding work in informal employment.

The purpose of this paper is to understand labor market regulations and their consequences for the allocation of resources.

This paper constructs a theoretical model to study labor market regulations in developing countries and how it affects the allocation of resources between the less productive informal activities and more productive formal activities. It also provides empirical support for some theoretical results using cross-country data.

When workers are risk-averse and the market for insurance against labor income risk is missing, regulations that provide insurance to workers (such as severance payments) reduce misallocation. However, regulations that simply create barriers to the dismissal of workers increase misallocation and end up reducing the welfare of workers. This study also provides some empirical evidence broadly consistent with the theoretical results using cross-country data. While dismissal regulations increase the share of informal employment, severance payments to workers do not.

The empirical exercise is constrained by the lack of availability of good data on the informal sector.

The analysis of the alternative labor market regulations analyzed in this paper in the presence of risk-averse workers is an original contribution to the literature.

The purpose of this paper is to evaluate critically the competing explanations for the cross-national variations in the scale of informal employment which variously correlate higher levels of informal employment with economic under-development (“modernization” theory), corruption, higher taxes and state interference (“neo-liberal” theory) and inadequate state intervention to protect workers from poverty (“structuralist” theory).

To do this, data on the prevalence of informal employment collected by the International Labour Organisation using a common survey method across 41 less developed economies are analysed and compared using bivariate regressions with World Bank development indicators.

Some 34.4 per cent of the non-agricultural workforce is in informal employment across these 41 countries, with the share in informal employment ranging from 83.6 per cent in India to 6.1 per cent in Serbia. Evaluating critically the competing explanations, a call is made for a synthesis of the modernisation and structuralist theoretical perspectives in a new “neo-modernisation” theory that tentatively associates higher levels of informal employment with economic under-development, smaller government and inadequate state intervention to protect workers from poverty.

Based on 41 cases, a multivariate regression analysis was not possible to determine how important each characteristic is to the final outcome whilst controlling for the other characteristics.

This paper tentatively displays that wider economic and social policies, such as social protection, are significantly correlated with the level of informal employment.

This is the first paper to use a direct survey to analyse and explain cross-national variations in informal employment in less developed economies.

This chapter evaluates the cross-national variations in the proportion of employment that is in informal sector enterprises and evaluates competing theories which view these cross-national variations to result from either economic underdevelopment (modernisation explanation), high taxes, public sector corruption and over-regulation of work and welfare (neo-liberal explanation) or conversely, a lack of intervention in the realm of social protection (political economy explanation).

To evaluate these competing explanations, the International Labour Organisation’s (ILO) country surveys that investigate the scale of employment in informal sector enterprise in 43 developing and transition economies, along with the World Bank database of development indicators, are analysed here.

The finding is that lower levels of employment in informal sector enterprises are closely associated with economic development, lower levels of public sector corruption and state intervention in the form of higher tax rates and social transfers to protect workers from poverty.

This chapter reveals the need to move beyond treating these contrasting representations as competing explanations and to recognise how all are required to more fully explain the prevalence of informal sector entrepreneurship.

Tackling employment in informal sector enterprise is shown to require broader economic and social policies associated with the modernisation of economies, tax rates, social protection and poverty alleviation.

One of the first evaluations of the competing explanations for why some countries have higher levels of employment in informal sector enterprises.

The purpose of this paper is to evaluate competing explanations for the greater prevalence of informal employment in some countries rather than others. These variously explain informal employment to be a result of either economic under-development and the lack of modernisation of governance (“modernisation” theory), higher taxes and too much state intervention (“neo-liberal” theory) or inadequate government intervention to protect workers from poverty (“political economy” theory).

To do this, an International Labour Organisation data base produced in 2018 on the prevalence of informal employment in 112 countries (comprising 90 per cent of the global workforce) is analysed, and macro-level economic and social conditions reflecting each of these theories tested using bivariate regressions.

The prevalence of informal employment ranges from 94.6 per cent of total employment in Burkina Faso to 1.2 per cent in Luxembourg. Evaluating the validity of the competing theories, neo-liberal theory is refuted, and a call made to synthesise the modernisation and political economy perspectives in a new “neo-modernisation” theory that tentatively associates the greater prevalence of informal employment with lower economic under-development, greater levels of public sector corruption, smaller government and lower levels of state intervention to protect workers from poverty.

This paper tentatively reveals the structural economic and social conditions that need to be addressed globally to reduce informal employment.

This is the first paper to report the results of a harmonised data set based on common criteria to measure the varying prevalence of informal employment globally (across 112 countries representing 90 per cent of global employment) in order to determine the structural economic and social conditions associated with higher levels of informal employment.