This paper proposes a framework for measuring the informal economy that is consistent with internationally agreed concepts and methodology for measuring GDP. Based on the proposed framework, the informal economy “comprises production of informal sector units, production of goods for own final use, production of domestic workers, and production generated by informal employment in formal enterprises.” This proposed framework will facilitate preparation of estimates of the informal economy as a component of GDP.

"A range of alternative empirical definitions of informal activity have been employed in the literature. Choice of definition is often dictated by data availability. Different definitions may imply very different conceptual understandings of informality. In this paper the authors investigate the degree of congruence between three definitions of informality based on employment contract registration, social security protection, and the characteristics of the employer and employment using Brazilian household survey data for the period 1992 to 2001. The authors present evidence showing that 64 percent of the economically active population are informal according to at least one definition, but only 40 percent are informal according to all three. Steady compositional changes have been taking place among informal workers, conditional on definition.

This study estimates the size of the informal economy, and the relative contribution of each underlying factor, for the Caucasus and Central Asia countries in 2008. Using a Multiple Indicator-Multiple Cause model, we find that a burdensome tax system, rigid labor market, low institutional quality, and excessive regulation in financial and products markets are determinant factors in explaining the size of the informal economy, which ranges from 26 percent of GDP in Kyrgyz Republic to around 35 percent of GDP in Armenia. Furthermore, the results show that higher levels of informality increase the levels of self employment and the percentage of currency held outside the banking system.

A range of alternative empirical definitions of informal activity have been employed in the literature. Choice of definition is often dictated by data availability. Different definitions may imply very different conceptual understandings of informality. In this paper the authors investigate the degree of congruence between three definitions of informality based on employment contract registration, social security protection, and the characteristics of the employer and employment using Brazilian household survey data for the period 1992 to 2001. The authors present evidence showing that 64 percent of the economically active population are informal according to at least one definition, but only 40 percent are informal according to all three. Steady compositional changes have been taking place among informal workers, conditional on definition. The econometric analysis reveals that the conditional impact of particular factors (demographic, educational attainment, and family circumstances) on the likelihood of informality varies considerably from one definition to another. The results suggest growing heterogeneity within the informal sector. Therefore, the authors argue that informal activity may be as much associated with entrepreneurial dynamism as with any desire to avoid costly contract registration and social protection. However, the authors confirm there is no a priori reason for entrepreneurial activity to be unprotected. Consequently definitions of informality based on occupation and employer size seem the most arbitrary in practice even if conceptually well-founded.

This handbook presents a cost-effective and reliable data collection strategy for measuring and analyzing informal employment and the informal sector. The cornerstone of this methodology is a version of the mixed survey that is anchored to the Labor Force Survey conducted regularly by developing countries. The Handbook draws from experience in the implementation of the mixed survey in Armenia, Bangladesh, and Indonesia under regional technical assistance 6430: Measuring the Informal Sector. It discusses viable methodologies and processes by which data collected from the mixed survey can be utilized to generate statistics on informal employment and the informal sector. The empirical evidence that will be produced can solidify the efforts on these topics, from research to policy making.

The Informal Economy: Measures, Causes, and Consequences provides a comprehensive account of the economics of informality through the lenses of various economic perspectives. Although informal economic activity is widespread all around the world, many issues around its nature and consequences remain largely under-explored or unresolved. Most importantly, the evidence presented in the existing literature on informality has failed to generate a consensus on the measurements, causes, and effects of the informal sector among researchers. Most, if not all, of the empirical results are inconclusive or dependent on the nature of the dataset used in the analysis. This book aims to address that gap by exploring different definitions and measures of the informal economy, including different perspectives, then subjecting these measures to a battery of empirical tests to examine the determinants and effects of informality. Through this analysis and an extensive review of the literature, the book explores many of the economic, political, and social factors of the informal economy including the relationship between informality and the tax burden, tax enforcement, and institutional quality. This key text makes for compulsive reading to scholars and students interested in the informal or shadow economy.

`The aim of this edited volume is to improve the measurement of the informal economy in the Indian contect and to make the concerns of its workers central to mainstream economic analysis.... Overall the book makes in important contribution in its effort to bring the informal economy into mainstream economic theory and policy.... [It] provides detailed empirical work on the informal economy in India and takes the first step in achieving the goal of bridging theory and empiricism through a focus on measurement' - Development and Change This volume, the result of a creative collaboration between research and action, is aimed at highlighting the contribution of informal workers to the Indian economy. It provides a unique perspective on informal employment in India, from both a macro and a micro perspective. The contributors put forth the argument that while the informal economy already has a place in official statistics, the existing methods of data collection are inadequate to capture the actual size of this sector or to measure its significant contribution to macroeconomic aggregates. They also maintain that there is a need to constantly revisit assumptions and test findings against field level evidence. Overall, this volume provides greater clarity to the nebulous concept of informal economy and establishes that it creates employment, provides goods and services, creates savings and investments, and yet the workers and producers of this economy usually live in poverty.