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It has now been more than 40 years since the fi rst attempts of defi ning and data collection on informal sector and informal employment on a large scale were launched in the early 1970s. Many debates paved the way for the international defi nition of the informal sector in 1993 and informal employment in 2003. The informal economy is finally a means for conciliating the two concepts and since the mid-1970s, national estimates of size (employment) and contribution (share of gross domestic product [GDP]) of the informal sector, and later on of the informal economy (and of its two major components: informal sector and employment outside the informal sector), have regularly been attempted and gathered on a large scale. This article is the most recent synthesis of these works. It is based on the recent compilations by the Bureau of Statistics of the International Labour Organization (ILO) and the National Accounts Section of the United Nations (UN) Statistics Division as well as on original national data. Employment in the informal economy is revealed to be as high as 58–70 per cent of non-agricultural employment at regional level (the informal sector representing from 50 per cent to 80 per cent of the informal economy) and the informal sectors contribution to non-agricultural GDP is from 25 per cent up to 50 per cent.
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DOI: 10.1177/097380101200600202
2012 6: 103Margin: The Journal of Applied Economic Research
Jacques Charmes
The Informal Economy Worldwide: Trends and Characteristics
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Margin—The Journal of Applied Economic Research 6 : 2 (2012): 103–132
SAGE Publications Los Angeles/London/New Delhi/Singapore/Washington DC
DOI: 10.1177/097380101200600202
The Informal Economy Worldwide:
Trends and Characteristics
Jacques Charmes
It has now been more than 40 years since the rst attempts of defi ning and data collection
on informal sector and informal employment on a large scale were launched in the early
1970s. Many debates paved the way for the international defi nition of the informal sector
in 1993 and informal employment in 2003. The informal economy is fi nally a means for
conciliating the two concepts and since the mid-1970s, national estimates of size (employ-
ment) and contribution (share of gross domestic product [GDP]) of the informal sector,
and later on of the informal economy (and of its two major components: informal sector
and employment outside the informal sector), have regularly been attempted and gathered
on a large scale. This article is the most recent synthesis of these works. It is based on the
recent compilations by the Bureau of Statistics of the International Labour Organization
(ILO) and the National Accounts Section of the United Nations (UN) Statistics Division
as well as on original national data. Employment in the informal economy is revealed
to be as high as 58–70 per cent of non-agricultural employment at regional level (the
informal sector representing from 50 per cent to 80 per cent of the informal economy)
and the informal sectors contribution to non-agricultural GDP is from 25 per cent up
to 50 per cent.
Keywords: Informal Economy, Informal Employment, Informal Sector
JEL Classifi cations: O17, O57, J21
1. INTRODUCTION
The concept of informal sector was coined at the beginning of the 1970s and
gave rise to many theoretical debates. After a fi rst tentative international statis-
tical defi nition of the informal sector in 1993, which succeeded in launching
data collection through ad hoc surveys at national level in many countries, but
not in putting an end to the debates, another tentative defi nition of informal
employment occurred in 2003 and resulted in a broader concept and a more
systematic introduction of its criteria of defi nition in the regular or permanent
The author is at the Institute of Research for Development (IRD), Centre for Population
and Development (CEPED), University Paris Descartes-Ined-IRD, France, email: jacques.
charmes@ird.fr. Most of his compilations have been undertaken under the auspices of the
international network, Women in Informal Employment: Globalizing and Organizing
(WIEGO, <www.wiego.org>), for the International Labour Offi ce.
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104 Margin—The Journal of Applied Economic Research 6 : 2 (2012): 103–132
labour force surveys. Today, estimates of informal employment and informal
sector employment exist in many countries, sometimes for long periods. But
systematic and comprehensive comparisons worldwide remain diffi cult for at
least two reasons: (a) fi rst, harmonisation of concepts at international level is
far from being reached; and (b) second—and especially—the two concepts of
informal sector and informal employment are neither mutually exclusive (and as
such not additive) nor the latter inclusive of the former, that is, informal employ-
ment does not include the informal sector in totality. This is why statistics of
informal employment and informal sector employment are generally presented
separately. This article deliberately opts for a defi nition of employment in the
informal economy as comprising employment in the informal sector and infor-
mal employment outside the informal sector (that is, the unprotected workers
in the formal sector and the domestic workers in the households).
Despite such diffi culties, macroeconomic pictures of the informal economy,
as a share of labour force or production (gross domestic product [GDP]), have
for long been estimated by economists and statisticians and used for policy pur-
poses. Many of them exist at national level since the late 1970s–early 1980s, but
it was in 1990 that Charmes presented a fi rst tentative international comparison
at world level in the OECD’s Informal Sector Revisited (Turnham et al., 1990).
This fi rst work was updated in 2002 for the ILO-WIEGO Women and Men in
the Informal Economy, prepared for consideration by the 90th International
Labour Conference (ILO, 2002b), and in 2009 for the OECD publication Is
Informal Normal? (Jütting and de Laiglesia, 2009). The tables presented in this
article have been prepared for the forthcoming updated 2012 publication of
the ILO–WIEGO.
After a brief reminder of the history of the concepts of informal sector,
informal employment and informal economy, and their related methods of
measurement, an assessment of trends in size of the informal economy will be
presented in the third section. The fourth section will describe the main charac-
teristics of the informal economy in terms of composition: main components,
gender, status and industries; and the fth section will attempt to assess the
contribution of the informal economy to GDP.
2. A BRIEF HISTORY OF 40 YEARS OF CONCEPTUALISATION AND DATA COLLECTION
ON THE INFORMAL ECONOMY
2.1 Theories and Concepts
More than 40 years ago, in the early 1970s, the rst tentative defi nitions and
data collections on a large scale on informal sector and informal employment
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Charmes THE INFORMAL ECONOMY WORLDWIDE 105
were launched. Long before, however, works by Boeke (1953), Geertz (1963)
and Lewis (1954) paved the way of dualistic approaches which, before being
disputed, offered an extraordinary space for expansion to the new theories of
economic development. It must also be noted that close behind these precur-
sors, it was up to national accountants to be the rst to propose procedures for
overall estimates of the traditional sector, agricultural and non-agricultural,
monetary and non-monetary, in their attempts to measure the GDP (Blades,
1975; Charmes, 1989; OECD, 1965, 2002).
It is in 1971 that the concept of ‘informality’ was born at the two extremes of
the African continent: in Ghana, with the notion of ‘informal income oppor-
tunities’ (Hart, 1971); and in Kenya, with the multi-criteria defi nition of the
informal sector by the ILO report of the World Employment Programme (ILO,
1972, with Richard Jolly and Hans Singer as main editors). The fi rst notion was
individual based and inspired many sociological and anthropological studies in
Africa and elsewhere (Bromley and Gerry, 1979); in Latin America in particu-
lar, it pushed the regular labour force surveys to start measuring the so-called
marginalisation of workers on the basis of level of earnings under the minimum
wage and in connexion with poverty. The second conception was establishment
or enterprise based, and was at the origin of numerous studies and surveys by
the ILO in Africa (Maldonado, 1987; Nihan et al., 1978), through its Jobs and
Skills Programme for Africa (JASPA); in Latin America (Tokman, 1987), through
its Regional Programme on Employment for Latin America and the Caribbean
(PREALC); and in Asia (Sethuraman, 1981), generally at capital city levels.
Both approaches (individual based and enterprise based) put the State as the
central cause of emergence of these petty activities, either by the intrinsic nature
of an emerging capitalism, supported by the new independent states and in need
of such a labour reserve/surplus (Gerry, 1979; Lebrun and Gerry, 1975), or by
the barriers that prevent private initiative to blossom out, a theory that will
culminate with De Soto (1986). Non-compliance with the offi cial regulations
is far from meaning that these activities are illegal. Charmes (1990) notes that
the inability of the State to make the operators comply with the laws it edicts is
rather a matter of inadequacy, powerlessness and even unwillingness with regard
to those jobs spontaneously created in a context of high unemployment and
underemployment. The 1993 International Conference of Labour Statisticians
(ICLS) resolution also remarks:
activities performed by production units of the informal sector are not necessarily
performed with the deliberate intention of evading the payment of taxes or social
security contributions, or infringing labour or other legislations or administrative
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106 Margin—The Journal of Applied Economic Research 6 : 2 (2012): 103–132
provisions. Accordingly, the concept of informal sector activities should be dis-
tinguished from the concept of activities of the hidden or underground economy.
(ILO, 1993b)
An implication on the defi nition and on the related methods of data collec-
tion is that non-registration of the individual (in the labour or social security
registers), or non-registration of the enterprise (in the fi scal or commercial
registers), is a basic criterion for the defi nition of the concept of informality.
2.2 Definitions
It is not necessary to recall here, in detail, the international defi nitions which are
applied—with national variations and adaptations—in the statistical surveys.
The informal sector was defi ned by the 15th ICLS (ILO, 1993a, 1993b),
referring to the characteristics of the economic units in which the persons
work: legal status (individual unincorporated enterprises of the household
sector); non-registration of the economic unit or of its employees; size under
ve permanent paid employees; and production for the market. The mixed
(household–establishment) surveys were recommended by the conference in
order to capture the informal sector. In this approach, all economic units oper-
ated by a household member are enumerated in the sampled households, and
then surveyed in a second stage through an establishment questionnaire. Later
on, in 1997, the Delhi Group on Informal Sector Statistics was set up by the
United Nations (UN) Statistical Commission in order to improve and develop
the defi nition and data collection on this sector. Since then, the group has met
regularly and the reports and contributions are available on the website of the
Ministry of Statistics and Programme Implementation (www.mospi.nic.in).
The 17th ICLS (ILO, 2003) has adopted guidelines for defi ning informal
employment as comprising all jobs carried out in informal enterprises as well
as in formal enterprises by workers, and especially employees,
whose employment relationship is, in law or in practice, not subject to national labour
legislation, income taxation, social protection or entitlement to certain employment
benefi ts (advance notice of dismissal, severance pay, paid annual or sick leave…)
because of non declaration of the jobs or the employees, casual or short duration
jobs, jobs with hours or wages below a specifi ed threshold…place of work outside
premises of employer’s enterprise (outworkers), jobs for which labour regulations are
not applied, not enforced, or not complied with for any other reason. (ILO, 2003)
Informal employment is, therefore, usually defi ned by the absence of social
protection (mainly health coverage) or the absence of written contract (but this
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Charmes THE INFORMAL ECONOMY WORLDWIDE 107
criterion can only be applied to paid employees and is consequently narrower
than social protection). Nevertheless, individuals may benefi t of social protec-
tion through the contribution of another member of the family. Consequently,
the appropriate defi nition should be related to the payment of social contri-
butions by the workers concerned rather than to the entitlement of the workers
to social benefi ts.
This new extended defi nition of informality is interesting in that it meets a
usual practice in various parts of the developing world (in Latin America and
in some countries of Asia) where labour force surveys are often used to collect
data on social protection coverage. As a consequence, the absence of social
protection, preferably to the absence of written contract (which applies to wage
employees only), has become the prevalent criterion for the measurement of
informal employment, and the introduction of questions in order to capture
social protection (especially health protection) has rapidly disseminated in
countries where household surveys are less regular or did not include such
questions. Nevertheless, practices continue to be diverse across regions and
countries: the ideal practice in data collection through labour force surveys or
other household surveys consists of capturing both informal employment and
informal sector employment, but this practice still remains rare.
Table 1 simplifi es the complexity of both concepts and shows that they are
not mutually exclusive.
Table 1 Components of the Informal Sector and of Informal Employment
Individuals /Jobs
Informal Formal
Economic units/Enterprises Informal sector (1) (2)
Formal sector (3) (4)
Source: Author.
The two cells (1) and (2) cover the ‘informal sector, while the two cells (1) and (3)
cover ‘informal employment’:
! employment in the informal sector = (1) + (2);
! informal employment = (1) + (3); and
! employment in the informal economy = (1) + (2) + (3).
Cell (2) means that in the informal sector, some individuals may have a formal
job (it may happen where the criteria of non-registration of the unit or of the
employees is not used in the defi nition and this is why informal employment
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108 Margin—The Journal of Applied Economic Research 6 : 2 (2012): 103–132
is not inclusive of informal sector in total). It may also occur due to the fact
that some workers in the informal sector benefi t from social security as ben-
efi ciaries of parents or spouses who are registered. Such a category is assumed
to be small. But the main category is cell (3), which represents informal jobs
outside the informal sector and in the formal sector. This category is assumed
to be huge and growing.
In order to avoid inconsistencies between the defi nitions of the two concepts,
it will be useful and practical to consider that the informal sector is a component
of the informal economy, and it is this defi nition which has been adopted and
applied in this article: employment in the informal economy is comprised all
persons (whatever their employment status) working in informal enterprises,
plus all persons working informally in other sectors of the economy, that is,
formal enterprises, households with paid employees (domestic workers) or own-
account workers producing goods (primary goods or manufactured goods) for
the household’s own fi nal use. By defi nition, all contributing (unpaid) family
workers are classifi ed in the informal employment. Consequently, formal paid
employees working in the informal sector (a category which may exist where
the defi nition of informal sector does not use the criterion of registration of
the employees) and unpaid family workers working in the formal sector are
also classifi ed in informal employment. As a consequence, such a defi nition
slightly diverges from the ILO defi nition of informal employment and in order
to avoid miscomprehension between the two approaches, it has been convened
to refer to the concept of informal economy, which is broader than the concept
of informal employment, in this article.
2.3 Surveys and Data Collection in a Historical Perspective
The main sources of data are the most recent national labour force surveys
and/or the mixed (household/establishment) surveys. However, many of the
published reports are not always available and where they are available, they
may not contain the required classifi cations and tabulations; in some countries,
the reference to the concept of informal employment or informal sector is not
even mentioned. In these cases particularly, the main source of data has been
the ILO questionnaires sent during the year 2011 by the Bureau of Statistics of the
ILO to all statistical offi ces of the member countries (developing countries and
transition countries), requesting from the national offi ces to fi ll detailed tables
on statistics on employment in the informal sector and informal employment,
with a special table on metadata allowing the knowledge of coverage of surveys
and defi nitions of concepts. The detailed sources and specifi cities of defi nitions
according to national circumstances can be found in Charmes (2011).
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Charmes THE INFORMAL ECONOMY WORLDWIDE 109
Two decades, the 1970s and the 1980s, have been standing out for the prior-
ity given to the enterprise-based approach, and this is not so surprising if we
consider that the building of national accounts and the reign of GDP made
data collection on production and earnings a necessity. Economic censuses and
even door-to-door censuses of establishments, regularly followed by sample
surveys of establishments, were the rule. It is also the period when adapted
and sophisticated designs of questionnaires were tested for the measurement
of production, showing, for instance, in Tunisia (1976–82) that direct declara-
tion was often underestimated by half compared with other controlled methods
(Charmes, 1992).
But even where extended to mobile (non-sedentary) vendors, the census
approach of activities failed to capture the bulk of home-based workers or
rather outworkers, that is, all those workers who do not perform their activities
in the premises of an enterprise and who are not enterprise based. This is why
from the very end of the 1980s, and especially further to the 1993 ICLS, which
defi ned the concept of informal sector, a change of methodological paradigm
intervened: the fi rst mixed household–establishment surveys were conducted
in Mali (1989) and in Mexico (1991), just before the 1993 ICLS recommenda-
tion proposed this type of survey as the most appropriate for capturing all the
diversity of informal sector activities. Many countries conducted such surveys
at national level (India, 1999–2000; Tanzania, 1991; South Africa, 2002, among
others) or at capital city or urban levels (the series of 1-2-3 surveys in the eight
francophone countries of West Africa as well as in Cameroon and Madagascar)
during the 1990s and the early 2000s. Asia followed in the second half of the
2000s (with mixed surveys in Bangladesh, the Philippines and Indonesia; and
also, Cambodia, Mongolia and Armenia). The decades of the 1990s and the
2000s have thus been the decades of mixed surveys.
At the same time, efforts started to include adapted questions or even short
sections in the questionnaires of regular household surveys (labour force surveys
or living conditions surveys) in Latin America and in Asia (Pakistan, Thailand),
while the (LSMS) questionnaires (and
the surveys of the same type, for instance, the Ghana
[GLSS] in Ghana), as well as the ‘integrated’ or ‘priority’ surveys on living
conditions of households, introduced a section for capturing the activities of
own-account and employers’ enterprises.
With the 2002 International Labour Conference (ILO, 2002a, 2002b) and the
2003 ICLS (ILO, 2003), the pendulum comes back to emphasise the individual-
based defi nitions, and efforts are made in order to capture information on the
type of contracts and social protection for the paid employees and the benefi t
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110 Margin—The Journal of Applied Economic Research 6 : 2 (2012): 103–132
of some kind of social protection for all the workers, and more generally for
the whole population, through household surveys.
To sum up, one can say that the fi rst two decades (the 1970s and the 1980s)
were decades of establishment of censuses and surveys, a concern that still goes
on for national accounts purposes. This period allowed reaching a better know-
ledge of the upper tier of the informal sector (the micro and small enterprises or
MSEs). The following decade (the 1990s) until the beginning of the 2000s has
been the decade of mixed surveys, achieving the requirement of accumulating
knowledge on the characteristics of the various components of the informal
sector, including the lower tiers, for policy purposes, especially employment
creation. Finally, the last decade (the 2000s) saw the rise of the household sur-
veys as the main vehicle of data collection on informality: fi rst, because they
had been conveniently the rst stage of the mixed surveys; second, because they
have often become regular, if not permanent (annual or even quarterly); and
third, because they can accommodate a special section or module to measure
informality in its broad sense (informal employment and informal sector).
3. TRENDS IN EMPLOYMENT IN THE INFORMAL ECONOMY
3.1 Employment in the Informal Economy
Table 2 attempts to assess the trends of employment in the informal economy
by 5 year periods over the past four decades.
(Table 2 continued)
Table 2 Share of Employment (%) in the Informal Economy in Total
Non-agricultural Employment by 5-Year Period and by Country and Region
Regions/Countries/
Years
1975–
79
1980–
84
1985–
89
1990–
94
1995–
99
2000–
04
2005–
10
Northern Africa 39.6 34.1 47.5 47.3 58.4
Algeria 21.8 25.6 42.7 41.3 45.6
Egypt 58.7 37.3 55.2 45.9 51.2
Morocco 56.9 44.8 67.1 78.5
Tunisia 38.4 35.0 39.3 47.1 35.0
Sub-Saharan Africa 67.3 72.5 76.0 86.9 65.9
Benin 92.9
Burkina Faso 70.0 77.0
Cameroon 84.0
Chad 74.2 95.2
Cote d’Ivoire 69.7
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Charmes THE INFORMAL ECONOMY WORLDWIDE 111
Regions/Countries/
Years
1975–
79
1980–
84
1985–
89
1990–
94
1995–
99
2000–
04
2005–
10
Democratic Republic
of Congo (ex-Zaire)
59.6 77.0
Ghana 65.3
Guinea 64.4 71.9 86.7
Kenya 61.4 70.1 71.6
Lesotho 70.7
Liberia 56.4
Madagascar 73.7
Mali 63.1 78.6 90.4 94.1 82.7
Mauritania 69.4 80.0
Mozambique 73.5 87.2
Namibia 43.8
Niger 62.9
Senegal 76.0
South Africa 46.2 32.7
Tanzania 57.7 46.0
Uganda 73.5
Zambia 58.3 76.3
Zimbabwe 51.6
Latin America 52.5 54.2 55.9 57.7
Argentina 47.5 53.3 60.8 50.0
Bolivia 56.9 63.5 75.1
Brazil 60.0 60.0 51.1 42.2
Chile 35.8
Colombia 38.4 61.4
Costa Rica 44.3 48.2
Dominican Republic 47.6 48.8
Ecuador 53.5 74.9 53.5
El Salvador 56.6 68.2
Guatemala 56.1
Haiti 92.6
Honduras 58.2 75.2
Mexico 55.5 59.4 50.1 54.3
Nicaragua 69.4
Panama 37.6 49.4 44.0
Paraguay 65.5 70.7
Peru 67.9 71.3
Uruguay 43.4 42.8
Venezuela 38.8 46.9 49.4 48.1
Southern and south-
eastern Asia
52.9 65.2 69.9 69.7!
Bangladesh 76.9
(Table 2 continued)
(Table 2 continued)
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Regions/Countries/
Years
1975–
79
1980–
84
1985–
89
1990–
94
1995–
99
2000–
04
2005–
10
India 76.2 73.7 83.4 84.2
Indonesia 39.2 77.9
Mongolia 26.3
Nepal 86.4
Pakistan 39.0 64.6 70.0 73.0
Philippines 70.5 72.0 73.3
Sri Lanka 62.1
Thailand 57.4 51.4 51.5 41.1
Timor Leste 62.0
Vietnam 68.5
Western Asia 43.2
Iran 43.5 48.8
Lebanon 51.8
Palestine 43.4 57.0
Syria 41.7 42.9 30.7 31.4
Turkey 30.9 33.2 30.1
Yemen 57.1 51.1
Transition countries 20.7!! 22.6!!
Armenia 19.8
Azerbaijan 45.8
Kyrgyzstan 44.4 59.2
Macedonia 12.6
Moldova 21.5 15.9
Romania 5.4 22.0
Russia 8.6 12.1
Serbia 6.1
Slovakia 4.7 5.9
Ukraine 7.0 9.4
Sources: Charmes (2002, 2009). For the most recent period, see Charmes (2011); data
compiled from the ILO statistics questionnaires (ILO, 2011). For the detailed sources,
see Charmes (2011).
Notes: (a) Figures in bold and in italics are averages based on a small set of countries.
In bold: non-weighted regional averages.
(b) Figures in italics refer to informal sector (and not to employment in the informal
economy).
(c) ! without Mongolia; and !!"
without Slovakia.
(Table 2 continued)
The interpretation of this table requires three preliminary remarks. First,
the indicator is based on non-agricultural employment while the defi nitions
of the informal sector, informal employment and the informal economy are
inclusive of agricultural activities. There are two reasons why an indicator
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Charmes THE INFORMAL ECONOMY WORLDWIDE 113
based on non-agricultural employment has been preferred: in countries where
agriculture is predominant and occupies the bulk of the labour force (most
sub-Saharan countries, southern and eastern Asia, for example), the share of
employment in the informal economy, including agriculture, is above 90 per
cent and changes over time may not be visible because of the volume of the
labour force; and also because the importance of change may remain hidden
by the dramatic fl ows of rural–urban migrations. An indicator based on non-
agricultural employment makes these changes more visible and its greater
variability is a better tracer of change.
Second, the table is based on estimates prepared along various procedures,
which have changed over time depending on the availability of sources and
data. Therefore, it is far from being homogeneous in defi nitions and methods of
compilation. Sources for this table have been given in detail in Charmes (2009).
From the mid-1970s and until the end of the 1980s–early 1990s, the gures
for the fi rst three 5 year periods (in Northern Africa, sub-Saharan Africa and
Asia) are mainly resulting from an application of the residual method, which
consists in comparing total employment (in population censuses or labour force
surveys) and registered employment (in economic or establishment censuses or
administrative records); censuses of establishments—where they exist—allow
identifying the informal sector on the one hand, and informal employment
outside the informal sector on the other hand. From the beginning of the
1990s, the results mainly come from the rst mixed surveys and focus on the
informal sector, while in the 2000s, the labour force surveys become the main
source of data and provide data on informal employment and employment in
the informal economy at large.
Third, another limitation comes from the fact that it is not exactly the same
set of countries for which estimates are available from one period to another:
consequently, the average can be non-signifi cant except if there are at least a
small number of countries which are present over all the periods. Despite these
limitations, several observations and conclusions can be drawn from Table 2.
Northern Africa, which is the region where estimates are the most numer-
ous over all the four decades, can be taken as an illustration of the counter-
cyclical behaviour of employment in the informal economy: it increases when
the rate of economic growth is decelerating; and contracts when the rate of
growth increases. Tunisia is a good example: starting from a relatively high
level (38.4 per cent of total non-agricultural employment), employment in
the informal economy drops (down to 35 per cent) in the mid-1980s when the
implementation of structural adjustment programmes induces its rapid growth,
until the end of the 1980s (39.3 per cent) and even until the end of the 1990s
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(47.1 per cent). Then the informal economy drops dramatically (35 per cent)
in the mid-2000s with the rapid growth of the Tunisian economy. In Algeria,
getting out of an administered and centralised economy, the informal economy
has continuously grown upwards from 21.8 per cent in the mid-1970s, up to
45.6 per cent at the end of the 2000s, with a small and short decrease (41.3 per
cent) at the beginning of the 2000s. Morocco is also characterised by a continu-
ous increase in the informal economy, from 56.9 per cent at the beginning of
the 1980s up to 78.5 per cent at the end of the 2000s, while Egypt is also expe-
riencing counter-cyclical behaviours in the growth of the informal economy
since the end of the 1990s.
In average, for the region, the most recent period is characterised by a huge
increase of employment in the informal economy, growing from 47.3 per cent
at the beginning of the 2000s, up to 58.4 per cent at the end of the decade
(even with an assumption at 35 per cent for Tunisia, the regional average would
remain at 52.3 per cent).
For sub-Saharan Africa, estimates are scattered through the seven 5 year
periods and the last period is characterised by a numerous set of countries (13),
but only ve of them provided estimates for the previous periods, making it
diffi cult to assess the trend for the region. However, the fi gures for the region
give an image of a continuously growing informal economy (from more than
60 per cent in the 1970s and mid-1980s, to more than 70 per cent at the end of
the 1980s–beginning of the 1990s and more than 80 per cent at the end of the
1990s), until the 2000s, which seem to be characterised by a decrease: even if the
informal economy rate at 65.9 per cent is not representative for all countries of
the region, it should be noted that the informal economy is decreasing in three
countries that can be compared (South Africa, Tanzania and Mali). And if we
compare the 10 countries for which data are available in the 1990s (including
Tanzania and South Africa with data at the very beginning of the 2000s) with the
13 countries with data for the most recent 5 year period (including Mali, 2004,
and Zimbabwe in this period), then the rate of employment in the informal
economy has dropped from 78.3 per cent down to 66.0 per cent between the
two periods, or 12 percentage points.
Sub-Saharan Africa could have then entered into a period of reduction of the
informal economy, which would be consistent with the perspectives of economic
growth. As a matter of fact and according to the International Monetary Fund
(IMF), the economic growth rate in sub-Saharan Africa for the period 2000–09
was established at 4.6 per cent per annum, substantially higher than that for
the previous periods (2.1 per cent during the 1980s and 2.2 per cent during the
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Charmes THE INFORMAL ECONOMY WORLDWIDE 115
1990s), and moreover, clearly higher than the population growth rate (2.5 per
cent) and the world economic growth rate (2.6 per cent) (IMF, 2010).
In the most recent period, employment in the informal economy ranges from
32.7 per cent in South Africa (a country with a large base of wage workers) to
77 per cent in the Democratic Republic of Congo, 84 per cent in Cameroon and
87.2 per cent in Mozambique (still, the gure only refers to employment in the
informal sector in this country).
In Latin America, employment in the informal economy seems on the rise,
increasing from 54.2 per cent at the end of the 1990s up to 57.7 per cent at the
end of the 2000s, even it this trend could be decelerating in the last period: most
countries for which an estimate is available for the fi rst half of the 2000s have
seen their employment in the informal economy decreasing in the second half
(except Mexico and Peru). Shares in non-agricultural employment range from
42.2 per cent in Brazil and 42.8 per cent in Uruguay to 71.3 per cent in Peru,
75.1 per cent in Bolivia and 75.2 per cent in Honduras.
In southern and south-eastern Asia, employment in the informal economy
is stabilised around 70 per cent of non-agricultural employment (if the average
does not include Mongolia, a country that could be more appropriately classi-
ed among the transition economies), ranging from 41.1 per cent in Thailand
to 84.2 per cent in India and 86.4 per cent in Nepal.
Countries of Western Asia (which can be classifi ed with Northern Africa
in the Middle East North Africa region, MENA) are presenting many similar
characteristics, in particular low female activity rates. Their average share of
employment in the informal economy is around 40–50 per cent (43.2 per cent
in 2000–04).
Lastly, transition countries are making their way out of their former
administered–centralised–wage economies and they see their share of employ-
ment in the informal economy (still often measured through the concept of
informal sector as in Russia and Ukraine) increasing little by little from 20.7 per
cent at the beginning of the 2000s, up to 27 per cent at the end of the decade, with
maxima in Kyrgyzstan (59.2 per cent for the informal sector) and Azerbaijan
(45.8 per cent) and minima in Ukraine and Russia (9.4 per cent and 12.1 per
cent respectively for the informal sector).
Except in this latter region, which is at its starting point, employment in the
informal economy represents more than 50 per cent of total non-agricultural
employment in all developing regions. With declining trends in sub-Saharan
Africa, stabilised trends in Asia and rather slowly increasing trends elsewhere,
it seems that there is a kind of convergence between the various regions at
world level.
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116 Margin—The Journal of Applied Economic Research 6 : 2 (2012): 103–132
4. MAIN CHARACTERISTICS OF THE INFORMAL ECONOMY WITH A SPECIAL EMPHASIS
ON GENDER
4.1 Informal Sector Employment and Informal Employment
Outside the Informal Sector
One of the major features of the informal economy is the relative size of
its two main sub-components: the informal sector on one hand; and infor-
mal employment outside the informal sector, which is comprised domestic
workers and informal employment in the formal sector, on the other. Table
3 shows that the structure of employment in the informal economy is rather
different from region to region.
The informal sector represents as much as 80 per cent of total employment
in the informal economy in sub-Saharan Africa (80.4 per cent) and in Asia
(79.4 per cent), against 64.6 per cent in Latin America, 58.7 per cent in the
MENA region and 50.5 per cent in transition countries. Given that the share
of domestic workers rarely exceeds 5 per cent of employment in the informal
economy, it means that it is in transition countries, MENA countries and, to a
lesser extent, in Latin America that informal employment in the formal sector
is the most common.
And while wage employment does not exceed 25 per cent of employment in
the informal sector in sub-Saharan Africa and in Latin America, and 35.6 per
cent in Asia, it is more extended in MENA countries (41.3 per cent) and in
transition countries (68.7 per cent). On the contrary, outside the informal
sector, informal wage employment outnumbers self-employment everywhere,
from 77.5 per cent in MENA to 91.5 per cent in Latin America and 88 per cent
in Asia.
4.2 Informal Economy and Gender
Regarding women, they are more likely to be self-employed in the informal
sector: from 64.2 per cent in MENA to 88.6 per cent in sub-Saharan Africa,
except in transition countries (28.9 per cent), and they are even more likely to
be wage employees in the informal economy outside the informal sector: more
than 92.5 per cent in all regions, up to 97.5 per cent in Asia. More generally, in
terms of gender (Charmes, 2011), the share of women in the informal economy
is higher than men in only one region: it is in sub-Saharan Africa that women
outnumber men in the informal economy as a whole (51.1 per cent) as well as
in the informal sector (51.1 per cent also), but not in informal employment
outside the informal sector (44.4 per cent). Their number is a little bit lower
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Table 3 Main Components of Non-agricultural Employment in the Informal Economy by Sector and
by Status in Employment in Developing and Transition Countries in 2005–10 (per cent)
REGIONS/Countries
Employment in the
Informal Economy Informal Sector
Employment in the
Informal Economy Outside
Informal Sector Informal
Sector in
Informal
Employment
Informal
Workers
Outside
Informal
Sector
Self-
employed
Wage
Employees
Self-
employed
Wage
Employees
Self-
employed
Wage
Employees
Women and men
Middle East–North
Africa (MENA)
40.1 59.9 58.7 41.3 15.0 77.5 58.7 41.3
Sub-Saharan Africa 64.9 35.1 75.2 24.8 12.4 87.6 80.4 19.6
Asia 53.8 46.2 64.4 35.6 12.0 88.0 79.4 20.6
Latin America 51.9 48.1 75.7 24.3 8.5 91.5 64.6 35.4
Transition 54.2 45.8 31.3 68.7 10.4 89.6 50.5 49.5
Women
MENA 39.1 60.9 64.2 35.8 4.5 95.5 63.8 36.2
Sub-Saharan Africa 59.2 40.8 88.6 11.4 7.5 92.5 67.9 32.1
Asia 57.2 42.8 78.0 22.0 2.5 97.5 72.0 28.0
Latin America 51.1 48.9 84.1 15.9 7.5 92.5 57.0 43.0
Transition 44.9 55.1 28.9 71.1 5.8 94.2 34.7 65.3
Men
MENA 25.2 48.1 33.2 37.8 5.0 95.0 69.4 30.6
Sub-Saharan Africa 59.1 40.9 76.6 23.4 5.1 94.9 70.7 29.3
Asia 50.9 49.1 61.4 38.6 6.6 93.4 82.2 17.8
Latin America 52.5 47.5 70.3 29.7 8.7 91.3 71.1 28.9
Transition 61.6 38.4 33.1 66.9 12.7 87.3 57.2 42.8
Source: Charmes (2011).
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118 Margin—The Journal of Applied Economic Research 6 : 2 (2012): 103–132
than men in Latin America (46.5 per cent in the informal economy as a whole
and 45 per cent in the informal sector, but 53.4 per cent outside the informal
sector). They represent only 32.2 per cent of employment in the informal
economy in transition countries (and 27.9 per cent in the informal sector) and
only 16.4 per cent in MENA (15.3 per cent in the informal sector, but 25.3 per
cent outside). The picture for Asia is mixed with 35.8 per cent of women in
employment in the informal economy (30.7 per cent in the informal sector
and 31.3 per cent outside).
4.3 Informal Economy and Industries
Finally, in terms of distribution by industries (Charmes, 2011), agriculture rep-
resents between 60–65 per cent of total employment in the informal economy
in most part of the world, except in Latin America (26.5 per cent) and in MENA
(40.2 per cent), and from 65 per cent to 70 per cent of female employment in
the informal economy, except in Latin America (17.6 per cent) and in MENA
(57.4 per cent). Regarding non-agricultural activities, manufacturing and con-
struction represent more than 41 per cent of non-agricultural employment in
the informal economy in MENA and Asia, but only 24.1 per cent in sub-Saharan
Africa, 26.8 per cent in Latin America and 18 per cent in transition countries.
Trade activities account for more than 34 per cent in sub-Saharan Africa and
Latin America, 32.6 per cent in MENA, 26.4 per cent in Asia and 22.6 per cent
in transition countries.
5. CONTRIBUTION OF THE INFORMAL ECONOMY TO GDP
Employment in the informal economy is comprised several components:
1. Employment in the informal sector.
2. Informal employment outside the informal sector, itself comprised:
! the subsistence producers in the primary sector;
! the domestic workers; and
! the informal workers of the formal sector.
In the 1993 revision of the System of National Accounts (SNA, 1993), the
informal sector was defi ned as a sub-sector of the household institutional sec-
tor in the national accounts: as such, its contribution to GDP can be measured.
Informal employment in the formal sector, on the contrary, is a hidden or non-
observed part of the economic units constituting the other institutional sectors
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Charmes THE INFORMAL ECONOMY WORLDWIDE 119
of the system of national accounts. Therefore, it cannot be easily distinguished
from the formal units and estimates are rarely available.
One of the most misleading confusion about the informal sector contribution
to GDP is its assimilation with the underground economy. The estimation of
the underground economy through econometric modelling (see, for instance,
Schneider, 2005; Schneider and Enste, 2000; Schneider et al., 2010) is certainly
interesting, but the comparison of the results with the current GDP is particu-
larly misleading because the national accounts already include a part of the
underground and illegal economy.
A tentative estimate of the informal sector contribution can be made for those
countries which prepare the household sector accounts. But the availability of
the household accounts is not suffi cient: the distribution of gross value added
(GVA) by industry is also required, because production for own fi nal use (not
transiting through the market) must be excluded as it is not part of the interna-
tional defi nition of the informal sector, and this can be dealt with by excluding
agricultural and related activities. Other exclusions are the imputed rents and
paid domestic services (which never go beyond 1 or 2 percentage points in
total GDP), but the necessary data are rarely available; consequently, the results
presented in Tables 4–8 remain proxies, but these proxies are acceptable.
Let us focus here on measurement of the contribution of the informal sec-
tor. In order to measure the contribution of the informal sector to GDP, it is
necessary to isolate this sector by using the table of national accounts cross-
classifying the GVA by industries and institutional sectors. Even if all countries
distinguish the various institutional sectors in their national accounts, not all
of them present the accounts of the institutional sectors in details, especially
by industries. The compilation of the UN Statistics Division (UN, 2004) and
its regular updating allows identifying the countries with a detailed household
institutional sector. Tables 4–8 are based on these compilations, as well as on
some national sources and a special report by AFRISTAT (1999) on the national
accounts of the West African Economic and Monetary Union (WAEMU)
countries. As far as it has been possible, ‘imputed rents’ and ‘private households
employing persons’ have been subtracted.
In sub-Saharan Africa (Table 4), the informal sector including the agricul-
tural household sector contributes to nearly two-third of the GDP (63.6 per
cent in arithmetical non-weighted mean), with a maximum in Niger (72.6 per
cent) and a minimum in Senegal (51.5 per cent). Excluding agriculture, the
share of informal sector in GDP represents approximately one-third of total
GDP (31.3 per cent), with a maximum in Cameroon (36.0 per cent) and a
minimum in Burkina Faso (21.7 per cent). Moreover, the non-agricultural
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informal sector is as high as 50 per cent of the non-agricultural GVA (50.2 per
cent), with a maximum in Benin (61.8 per cent) and a minimum in Burkina
Faso (36.2 per cent).
In the MENA (Table 5), the contribution of the informal sector including
agriculture is equivalent to a little bit more than one-third of total GDP (36.2 per
cent) and a little bit more than one-fourth (26.2 per cent) if the agricultural
household sector is excluded. Finally, the non-agricultural informal sector rep-
resents 29.2 per cent of total non-agricultural GVA. The minima are observed
in Egypt for the three indicators (27.8, 14.7 and 16.9 per cent respectively) and
the maxima in Tunisia (respectively 41.8, 29.8 and 34.1 per cent) and Palestine
(with the non-agricultural informal sector at 33.4 per cent of total GDP).
In Asia (Table 6), the estimates of informal sector contribution to GDP
are very partial and incomplete, except for India (National Commission for
Enterprises in the Unorganized Sector, 2008, 2010; National Sample Survey
Organization [NSSO]–
[MOSPI], 2006a, 2006b, 2007a, 2007b). Bhutan only measures construction and
private households with employed persons in the informal sector; Sri Lanka
does not measure trade, transport and services; and Mongolia does not meas-
ure manufacturing and services—in the three countries, it is not a question of
defi nition, but rather a lack of data, which explains such restrictions. As a result,
the regional average is not signifi cant and it is better to look at Indian estimates
as representative for the region: the informal sector (including agriculture)
contributes to 54.2 per cent of total GDP in India (2008) and 38.4 per cent if
agriculture is excluded. With 46.3 per cent of total non-agricultural GVA, the
informal sector stricto sensu is the highest contributor to non-agricultural GVA
in all countries reviewed in all regions.
In Latin America (Table 7), there are estimates available for six countries, but
only four countries have detailed their household sector accounts by industries.
Only global estimates (including agriculture) can be generated for Brazil and
Mexico. The estimates prepared here are approximate and assimilate the infor-
mal sector to the household sector (minus subsistence agriculture, households
with employed persons and imputed rents), but national methodologies and
offi cial defi nitions may be more complex and in the case of Mexico and emerg-
ing economies, the informal sector can be only a segment of the household
sector.
The informal sector (including agriculture) represents, in average, 29.2 per
cent of total GDP, with a maximum in Colombia (37.5 per cent) and a mini-
mum in Venezuela (17.0 per cent). Excluding agriculture, the informal sector
contributes, in average, to 24.0 per cent of total GDP (maximum in Guatemala
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Table 4 Contribution of Informal Sector to GDP in Various Developing Countries: Sub-Saharan Africa, Years 2000s
Countries (years)
Agricultural
Gross Value
Added
(GVA)
Non-
agricultural
GVA
Total GDP
in
National
Currency!Currency
Informal
Sector GVA
(including
agriculture)
(1)
Agricultural
Household
Sector
Informal
Sector GVA
(excluding
agriculture)
(2)
(1) in %
of Total
GDP
(2) in %
of Non-
agricultural
GVA
(2) in %
of Total
GDP
Benin (2000) 632 899 1,656 Billion FCFA 1,185 629 556 71.6 61.8 33.6
Burkina Faso (2000) 590 1,036 1,729 Billion FCFA 965 590 375 55.8 36.2 21.7
Cameroon (2003) 1,646 5,756 7,402 Billion FCFA 4,260 1,596 2,664 57.6 46.3 36.0
Niger (2009) 1,020 1,318 2,338 Billion FCFA 1,698 1,019 679 72.6 51.5 29.0
Senegal (2000) 607 2,513 3,493 Billion FCFA 1,799 572 1,227 51.5 48.8 35.1
Togo (2000) 439 622 109 Billion FCFA 790 439 351 72.5 56.4 32.2
Sub-Saharan Africa 63.6 50.2 31.3
Source: Personal compilations of the author, based on national sources and other sources quoted in references (Charmes, 2007; UN, 2004, updated
2008).
Note: The GDP estimates used for the calculation of ratios (and noted with !) are obtained by summing up the agricultural Gross Value Added and
the non-agricultural Gross Value Added: they are excluding Financial Intermediation Services Indirectly Measured (FISIM), and including taxes less
subsidies on products, and statistical discrepancy.
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Table 5 Contribution of Informal Sector to GDP in Various Developing Countries: MENA, Years 2000s
Countries (years)
Agricultural
Gross Value
Added
(GVA)
Non-
agricultural
GVA
Total GDP
in
National
Currency!Currency
Informal
Sector GVA
(including
agriculture)
(1)
Agricultural
Household
Sector
Informal
Sector GVA
(excluding
agriculture)
(2)
(1) in %
of Total
GDP
(2) in %
of Non-
agricultural
GVA
(2) in %
of Total
GDP
Algeria (2003) 510,033 4,202,980 4,713,013 Million dinars 1,786,292 510,033 1,276,259 37.9 30.4 27.1
Egypt (2008) 113,104 742,262 855,366 Million EGP 237,690 111,994 125,696 27.8 16.9 14.7
Iran (2007) 264,991 2,654,279 2,919,270 Million rials 1,039,140 214,620 824,520 35.6 31.1 28.2
Tunisia (2004) 4,450 30,698 35,148 Million dinars 14,708 4,242 10,466 41.8 34.1 29.8
Palestine (2007) 293 3,822 4,115 Million US$ 1,568 293 1,275 38.1 33.4 31.0
MENA 36.2 29.2 26.2
Source: Personal compilations of the author, based on national sources and other sources quoted in references (Charmes, 2007; UN, 2004, updated
2008).
Note: (a) The GDP estimates used for the calculation of ratios (and noted with!) are obtained by summing up the agricultural gross value added
and the non-agricultural gross value added: they are excluding Financial Intermediation Services Indirectly Measured (FISIM), and including taxes
less subsidies on products, and statistical discrepancy.
(b) EGP = Egyptian pound; US$ = US dollar.
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Table 6 Contribution of Informal Sector to GDP in Various Developing Countries: Asia, Years 2000s
Countries (years)
Agricultural
Gross Value
Added
(GVA)
Non-
agricultural
GVA
Total GDP
in National
Currency!Currency
Informal
Sector GVA
(including
agriculture)
(1)
Agricultural
Household
Sector
Informal
Sector GVA
(excluding
agriculture)
(2)
(1) in %
of Total
GDP
(2) in %
of Non-
agricultural
GVA
(2) in %
of Total
GDP
Bhutan (2006)!! 10,256 43,432 53,688 Million ngultum 10,717 10,256 461 20.0 1.1 0.9
India (2008) 907,515 4,406,255 5,313,770 Trillion rupees 2,880,650 840,370 2,040,280 54.2 46.3 38.4
Mongolia!!!
(2008)
49,092 176,642 225,734 Trillion togrik 67,590 45,976 21,614 29.9 12.2 9.6
Sri Lanka!!!!
(2007)
42,911 283,291 326,602 Trillion rupees 55,142 28,536 26,606 16.9 9.4 8.1
Asia 30.2 17.2 14.2
Without Sri Lanka
and Bhutan
42.1 29.3 24.0
Source: Personal compilations of the author, based on national sources and other sources quoted in references (Charmes, 2007; UN, 2004, updated
2008).
Notes: (a) The GDP estimates used for the calculation of ratios (and noted with!) are obtained by summing up the agricultural gross value added
and the non-agricultural gross value added: they are excluding Financial Intermediation Services Indirectly Measured (FISIM), and including taxes
less subsidies on products, and statistical discrepancy.
(b) !!informal sector is only comprised construction and private households with employed persons;
!!!informal sector is not comprised manufactur-
ing and services; and !!!!informal sector is not comprised trade, transport and services.
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Table 7 Contribution of Informal Sector to GDP in Various Developing Countries: Latin America, Years 2000s
Countries (years)
Agricultural
Gross Value
Added
(GVA)
Non-
agricultural
GVA
Total GDP
in National
Currency!Currency
Informal
Sector GVA
(including
agriculture)
(1)
Agricultural
Household
Sector
Informal
Sector GVA
(excluding
agriculture)
(2)
(1) in %
of Total
GDP
(2) in %
of Non-
agricultural
GVA
(2) in %
of Total
GDP
Brazil (2006) 2,034,420 Million reals 438,942 21.6
Colombia (2006) 35,276 360,353 395,629 Billion pesos 148,195 31,735 116,460 37.5 32.3 29.4
Guatemala (2006) 25,903 203,903 229,548 Million quetzal 84,751 15,572 69,279 36.9 34.0 30.2
Honduras (2006) 24,459 188,386 163,927 Million lempira 51,655 17,626 34,029 31.5 18.1 20.8
Mexico (2009) 407,726 10,931,485 11,339,211 Million pesos 3,505,005 30.9
Venezuela (2006) 14,405 347,746 362,151 Billion bolivar 61,723 4,877 56,846 17.0 16.3 15.7
Latin America 29.2 25.2 24.0
Source: Personal compilations of the author, based on national sources and other sources quoted in references (Charmes, 2007; UN, 2004, updated
2008).
Note: The GDP estimates used for the calculation of ratios (and noted with !) are obtained by summing up the agricultural gross value added and
the non-agricultural gross value added: they are excluding Financial Intermediation Services Indirectly Measured (FISIM), and including taxes less
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Charmes THE INFORMAL ECONOMY WORLDWIDE 125
with 30.2 per cent and minimum in Venezuela with 15.7 per cent) and it con-
tributes to 25.2 per cent of non-agricultural GVA (34.0 per cent in Guatemala
and 16.3 per cent in Venezuela).
Finally, it is for the transition economies (Table 8) that the number of esti-
mates is the greatest with 15 countries. This is not surprising, given that the SNA
has been implemented recently in these former socialist countries, which used
to apply a specifi c system of material balances; applying a new system, national
accountants have tended to strictly follow the rules of the central framework of
the SNA 1993. The private sector has recently emerged in the transition countries
where paid employment in public enterprises was the rule, and it is expected
to grow more and more, especially the microenterprises of the informal sector,
hence the importance of the efforts towards their measurement.
With a contribution of 19.5 per cent to total GDP in average, the informal
sector (including agriculture) is at a maximum in Kyrgyzstan (45.2 per cent) and
a minimum in Belarus (6.7 per cent). When excluding agriculture, the contribu-
tion of informal sector drops down to 10.7 per cent in average (20.3 per cent in
Kyrgyzstan and 3.4 per cent in Belarus) and to 13.9 per cent of non-agricultural
GVA (27.5 per cent in Kyrgyzstan and 3.7 per cent in Belarus).
Table 9 synthesises the results by region. Sub-Saharan Africa is the region
with the largest estimates for the contribution of informal sector to GDP: nearly
two-third including agriculture; one-third excluding agriculture; and half of
non-agricultural GVA. It is followed by India (as representative of Asia), with
around 50 per cent of total GDP (including agriculture), 38 per cent exclud-
ing agriculture and 46.3 per cent of non-agricultural GVA. Then come MENA
countries with respectively 36.2 per cent, 26.2 per cent and 29.2 per cent; Latin
America (with 29.2 per cent, 24.0 per cent and 25.2 per cent); and lastly, transi-
tion countries (with 19.5 per cent, 11 per cent and 14 per cent). The informal
sector (in its broad sense: including agriculture, as well as in its strict sense:
excluding agriculture) is the largest contributor to GDP in the regions where
agriculture is predominant (sub-Saharan Africa and Asia).
Assessing trends in the contribution of the informal sector to GDP is more
diffi cult because changes in values are only due to assumptions of national
accountants and the only noticeable changes are structural, when a new base
year allows radical changes based on updated sources and new surveys. However,
it was attempted to reconstitute three decades. For the 1980s, the oldest avail-
able estimates were selected (for a set of countries, these oldest estimates are
from the beginning of the 1990s). For the 2000s, the most recent estimates were
selected; and for the 1990s, estimates from the mid-1990s were selected (but for
some countries, it was necessary to select years in the beginning of the 2000s).
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Table 8 Contribution of Informal Sector to GDP in Various Developing Countries: Transition Countries, Years 2000s
Countries (years)
Agricultural
Gross Value
Added
(GVA)
Non-
agricultural
GVA
Total GDP
in
National
Currency!Currency
Informal
Sector GVA
(including
agriculture)
(1)
Agricultural
Household
Sector
Informal
Sector GVA
(excluding
agriculture)
(2)
(1) in %
of Total
GDP
(2) in %
of Non-
agricultural
GVA
(2) in %
of Total
GDP
Armenia (2008) 581,923 2,296,207 2,878,130 Million dram 792,866 346,111 446,755 27.5 19.5 15.5
Azerbaijan (2008) 2,236 35,793 3,8029 Million manat 6,774 2,070 4,704 17.8 13.1 12.4
Belarus (2008) 10,846,100 132,777,900 143,624,000 Million roubles 9,584,350 4644,130 4,940,220 6.7 3.7 3.4
Bulgaria (2006) 3,444 36,906 40,350 Million lev 8,711 2,635 6,076 21.6 16.5 15.1
Estonia (2008) 6,381 217,081 223,462 Million kroon 23,808 1,961 21,847 10.7 10.1 9.8
Kazakhstan (2009) 1,002,590 14,894,110 15,896,700 Million tengue 3,651,800 680,142 2,971,658 23.0 20.0 18.7
Kyrgyzstan (2008) 44,151 124,521 168,672 Million som 76,309 42,083 34,226 45.2 27.5 20.3
Latvia (2007) 468 12,592 13,060 Million lats 1,470 181 1,289 11.3 10.2 9.9
Lithuania (2008) 436 99,204 99,640 Million litas 14,087 2,347 11,740 14.1 11.8 11.8
Macedonia (2008) 41,341 316,109 357,450 Million denar 80,339 35,932 44,407 22.5 14.0 12.4
Moldova (2008) 5,544 46,230 51,774 Million leu 10,355 4,647 5,708 20.0 12.3 11.0
Russia (2009) 1,606,420 32,554,780 34,161,200 Million rubles 3,626,670 812,523 2,814,147 10.6 8.6 8.2
Serbia (2008) 2,722,460 Million Serbian
dinar
679,947 25.0
Slovenia (2005) 5,769,277 Million tolar 1,127,050 19.5
Ukraine (2008) 63,353 797,361 860,714 Million hryvnia 140,774 38,225 102,549 16.4 12.9 11.9
Transition countries 19.5 13.9 10.7
Source: Personal compilations of the author, based on national sources and other sources quoted in references (Charmes, 2007; UN, 2004, updated
2008).
Note: The GDP estimates used for the calculation of ratios (and noted with !) are obtained by summing up the agricultural gross value added and
the non-agricultural gross value added: they are excluding Financial Intermediation Services Indirectly Measured (FISIM), and including taxes less
subsidies on products, and statistical discrepancy.
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Margin—The Journal of Applied Economic Research 6 : 2 (2012): 103–132
Charmes THE INFORMAL ECONOMY WORLDWIDE 127
Table 9 Contribution of Informal Sector to GDP by Region, Years 2000
Countries (years)
Informal Sector
GVA (including
agriculture) in %
of Total GDP
Informal Sector GVA
(excluding agriculture)
in % of Non-
agricultural GVA
Informal Sector
GVA (excluding
agriculture) in %
of Total GDP
Sub-Saharan Africa 63.6 50.2 31.3
MENA 36.2 29.2 26.2
Asia 30.2 17.2 14.2
Asia without Sri Lanka
and Bhutan
42.1 29.3 24.0
India 54.2 46.3 38.4
Latin America 29.2 25.2 24.0
Transition countries 19.5 13.9 10.7
Sources: Tables 4 to 8.
Consequently, some estimates are used for two decades. Finally, the only regions
for which the samples are representative across time are Northern Africa and
transition countries.
Table 10 presents the available data and estimates over the three past decades
for the various regions.
The number of countries for which estimates are available is relatively impor-
tant in sub-Saharan Africa, especially for the 1990s, and in transition countries,
for the 2000s. Trends in the contribution of informal sector lato sensu (including
agriculture) are somehow unclear: a substantial increase from the 1980s to the
1990s (the contribution grows from 38.5 per cent up to 66.4 per cent of total
GDP), followed by a slight decrease or a stagnation in the 2000s (63.6 per cent)
is seen in sub-Saharan Africa. In the MENA region, a slight decline is observed
throughout the period (from 38.8 per cent to 36.2 per cent), as well as in Latin
America (from 32.0 per cent to 29.2 per cent). Interpreting Asian trends is more
cumbersome given that only Indian data are available for the last decade while
this country did not belong to the panel of countries in the previous decade. On
the contrary, trends in the contribution of informal sector excluding agriculture
are more striking and converging: a clear growing trend is observed for the indi-
cator, either based on total GDP or on non-agricultural GVA. In sub-Saharan
Africa, it has grown from 32.5 per cent up to 50.2 per cent, especially during
the last decade; in Latin America, from 21.6 per cent to 25.2 per cent; and even
in transition countries, from 12.3 per cent up to 13.9 per cent.
To a certain extent, those gures are underestimated because the informal
economy in general, and the informal sector in particular, are usually char-
acterised by weak statistics, despite the recent progress of which the present
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128 Margin—The Journal of Applied Economic Research 5 : 2 (2011): 139–181
Table 10 Trends in Informal Sector Contribution to GDP in Various Regions
Number of Countries
Informal Sector (including
agriculture) in % of Total GDP
Informal Sector (excluding agriculture) in % of
Non-agricultural GVA Total GDP
1980s 1990s 2000s 1980s 1990s 2000s 1980s 1990s 2000s 1980s 1990s 2000s
Sub-Saharan Africa 12 19 (17) 6 38.5 54.5 (66.4) 63.6 32.5 37.3 (38.8) 50.2 22.0 24.1 (24.9) 31.3
Middle East North
Africa (MENA)
3 3 5 38.8 37.9 36.2 28.3 29.3 29.2 23.9 25.6 26.2
Asia 5 (3) 4 (1) 33.6 (42.3) 30.2 (54.2) 24.3 (31.5) 17.2 (46.3) 19.9 (25.2) 14.2 (38.4)
Latin America 6 (5) 6 25.9 (32.0) 29.2 15.6 (21.6) 25.2 13.6 (18.8) 24.0
Caribbean 3 22.2 21.2 19.7
Transition countries 11 15 23.8 19.5 12.3 13.9 9.9 10.7
Sources: Personal compilations of the author, based on national sources and other sources quoted in references, namely, Charmes (2007) and UN
(2004, 2 vol., pp. 1332, 1302). Updated 2008.
Notes: (a) Between brackets: atypical countries are excluded.
(b) It is not possible to calculate non-agricultural GDP; consequently, the gross value added is taken as a reference.
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Charmes THE INFORMAL ECONOMY WORLDWIDE 129
compilation is an illustration. Furthermore, the contribution of informal sector
to GDP does not take into account informal employment outside the informal
sector, which is scattered all over the various institutional sectors. The volume
of this sub-component of the informal economy can be now estimated: the
question is then to know what value added can be imputed to these jobs. But at
the same time, these same fi gures of the contribution of informal sector to GDP
are overestimated because they are based on the assumption that the household
sector can be assimilated into the informal sector. If this can be considered as
approximately true in regions with large traditional subsistence agriculture and
small formal sector, it is not so justifi ed for emerging economies.
6. CONCLUSION
Progress made in defi nitions and measurement of the informal economy over
the past four decades now allows us to draw a more comprehensive and detailed
picture of a phenomenon which has, for long, remained ignored, underestimated
and neglected. Two international defi nitions and the design of ad hoc surveys
as well as dedicated set of questions in permanent labour force surveys have
considerably helped in this regard. However, the two defi nitions remain non-
complementary and it is necessary to resort to the concept of employment in
the informal economy for their reconciliation.
In most parts of the world—but with regional specifi cities—the informal
economy supplies a majority of the labour force with jobs for earning living or
operating small enterprises: 70 per cent in south and Southeast Asia; 66 per cent
in sub-Saharan Africa (with most of these jobs in the informal sector in these
two regions); and 58 per cent in Latin America, not even counting agricultural
jobs. Although such a bulk may result in low productivity and low income, an
important part of the GDP is generated by these activities. In fact, including
agriculture, the informal sector represents nearly two-third of total GDP in
sub-Saharan Africa, more than 54 per cent in India and nearly one-third in
Latin America; and excluding agriculture, respectively half, 46 per cent and
one-fourth of non-agricultural GDP. Contrary to a widespread idea, women
are outnumbering men in the informal economy only in sub-Saharan Africa,
but this fi nding means that, still in many parts of the world, female economic
participation is not well captured particularly in agriculture and food products
processing. Efforts in data collection methods must be pursued: time-use surveys
can be useful in this regard (Antonopoulos and Hirway, 2009).
The recent recognition of the importance of these activities in the functioning
of the labour market and in the generation of income and wealth has resulted
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130 Margin—The Journal of Applied Economic Research 6 : 2 (2012): 103–132
in more continuous and detailed data collection, especially through permanent
labour force surveys, so that the informal economy, with all its components,
could become a crucial indicator of the functioning of the economy as a whole.
In particular, the microenterprises of the informal sector, the self-employed, the
informal workers of the formal sector and the domestic workers may follow pro
or counter-cyclical trends at the same time during crises or during periods of
growth and such diverse behaviours are interesting to know and understand in
order to design the most appropriate and timely policy measures.
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This article offers a preliminary theoretical framework for an analysis of labour in urban Senegal. The writers’ studies of petty commodity and commodity production in Dakar—arising from which they propose to analyse the process of class formation and the class position of various sections of the urban labour force—require at the outset an analysis of the dialectical relationship between the dominant capitalist mode of production and the subordinate forms of production in underdeveloped countries. The term form of production is deliberate. Mode of production seems to the writers inappropriate, since it refers essentially to a totality which is self-sufficient at both the superstructural level and at the economic base. Forms of production exist at the margins of the capitalist mode of production, but are nevertheless integrated into and subordinate to it. This article sets out to examine the processes and relations of production which characterise certain subordinate forms of production.
Article
Based on a joint seminar of the OECD Development Centre and the World Bank in September 1988, these papers are divided into three sections: methodology and theory; regional perspectives (Latin America, Africa); and the links between informal sector employment and education and training. The focus of many papers is on reviewing existing knowledge and research in order to identify gaps for a future agenda; models, policies and programmes for urban labour markets are also extensively discussed. A bibliography provides c300 references to books, reports and journal articles. -M.Amos
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Measuring informal employment has remained a challenge and requires the use of a variety of sources and methods, including the use of data for self-employment as a proxy indicator. Although patterns are not uniform, informal employment persists at a high level in all parts of the developing world, with the highest level seen in sub-Saharan Africa where more than twothirds of people in the non-agricultural sector are working in informal jobs. Important gender differences can be seen in informal employment, with patterns in job status and earnings differing distinctly between men and women. Moreover, the differences in earnings between formal and informal work depend on the job status with informal entrepreneurs being better off relative to informal employees.
Article
This article originated in the study of one Northern Ghanaian group, the Frafras, as migrants to the urban areas of Southern Ghana. It describes the economic activities of the low-income section of the labour force in Accra, the urban sub-proletariat into which the unskilled and illiterate majority of Frafra migrants are drawn. Price inflation, inadequate wages, and an increasing surplus to the requirements of the urban labour market have led to a high degree of informality in the income-generating activities of the sub-proletariat. Consequently income and expenditure patterns are more complex than is normally allowed for in the economic analysis of poor countries. Government planning and the effective application of economic theory in this sphere has been impeded by the unthinking transfer of western categories to the economic and social structures of African cities. The question to be answered is this: Does the ‘reserve army of urban unemployed and underemployed’ really constitute a passive, exploited majority in cities like Accra, or do their informal economic activities possess some autonomous capacity for generating growth in the incomes of the urban (and rural) poor?
Article
The small-scale trader and producer has been studied as an individual by sociologists and anthropologists, but now is being seen more as a member of a significant and vital urban economic formation, variously termed the ‘informal sector’, ‘the marginalized mass’, the petty commodity mode of production, and so on. This paper examines the nature of the Dakar economy, the position and role of the small-scale self-employed producer within the urban economy, and some of the fundamental mechanisms of transition and transformation at work within the environment in which these producers operate. The conclusions are far from optimistic: without radical changes to the economy as a whole, there exists little or no possibility of an across-the-board improvement in the living and working conditions of the mass of small-scale producers.