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Leandro Medina, Mr. Andrew W Jonelis, and Mehmet Cangul
The multiple indicator-multiple cause (MIMIC) method is a well-established tool for measuring informal economic activity. However, it has been criticized because GDP is used both as a cause and indicator variable. To address this issue, this paper applies for the first time the light intensity approach (instead of GDP). It also uses the Predictive Mean Matching (PMM) method to estimate the size of the informal economy for Sub-Saharan African countries over 24 years. Results suggest that informal economy in Sub-Saharan Africa remains among the largest in the world, although this share has been very gradually declining. It also finds significant heterogeneity, with informality ranging from a low of 20 to 25 percent in Mauritius, South Africa and Namibia to a high of 50 to 65 percent in Benin, Tanzania and Nigeria.
Guillermo Javier Vuletin
This paper estimates the size of the informal economy for 32 mainly Latin American and Caribbean countries in the early 2000s. Using a structural equation modeling approach, we find that a stringent tax system and regulatory environment, higher inflation, and dominance of the agriculture sector are key factors in determining the size of the informal economy. The results also confirm that a higher degree of informality reduces labor unionization, the number of contributors to social security schemes, and enrollment rates in education.
Mr. Mauricio Vargas
Paraguay’s economy features a high degree of informality. Based on different estimation approaches, informal activity represents more than half of total employment in Paraguay, a higher rate than those observed in its Latin American and the Caribbean peers. Theoretical and empirical considerations support the notion that regulations, enforcement policies, and government effectiveness are the ultimate determinants of informality. In all of these areas Paraguay performs weakly compared to regional peers. Using household and enterprise surveys, we find that Paraguay’s informal sector absorbs the most vulnerable workers but affects negatively medium and large firms in the formal sector. DSGE model simulations suggest that the optimal combination of policies to reduce informality is not straightforward, and needs to reflect the specific circumstances and objectives of the country.
Guillermo Javier Vuletin

as a proxy for the growth of the informal economy. This method is simple and appealing, but has many drawbacks, including: (i) not all informal economy activities require a considerable amount of electricity (e.g. personal services) or use other energy sources (like coal, gas, etc.), hence only part of the informal economy growth is captured; and (ii) the electricity-overall GDP elasticity might significantly vary across countries and over time. Transaction approach : 9 Using Fischer’s quantity equation, Money*Velocity = Prices*Transactions , and assuming that

Mr. Mauricio Vargas

contribution to total household consumption and is included in the national definition of employment); (d) Contributing family workers in formal or informal enterprises; and (e) Employees holding informal jobs in formal enterprises (including government units and nonprofit institutions), informal enterprises or as paid domestic workers employed by households. Table A1. Size of the Informal Economy: Growth, Inequality and Institutions VARIABLES (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (17

Leandro Medina, Mr. Andrew W Jonelis, and Mehmet Cangul

activity. Using findings that indicate the electricity-overall GDP elasticity is close to one, these authors suggest using the difference between growth of electricity consumption and growth of official GDP as a proxy for the growth of the informal economy. This method is simple and appealing, but has many drawbacks, including: (i) not all informal economy activities require a considerable amount of electricity (e.g. personal services) or the use of other energy sources (like coal, gas, etc.), hence only part of the informal economy growth is captured; and (ii) the

Céline Allard

authors suggest using the difference between growth of electricity consumption and growth of official GDP as a proxy for the growth of the informal economy. This method is simple and appealing, but has many drawbacks, including that (1) not all informal economy activities require a considerable amount of electricity (for example, personal services) or the use of other energy sources (for example, coal, gas), hence only part of the informal economy growth is captured; and (2) the electricity-overall GDP elasticity might vary significantly across countries and over time