Informality in Latin America and the Caribbean

35 Pages Posted: 20 Apr 2016

See all articles by Norman Loayza

Norman Loayza

World Bank - Research Department

Luis Servén

World Bank - Development Research Group (DECRG)

Naotaka Sugawara

World Bank

Date Written: March 1, 2009

Abstract

This paper studies the causes and consequences of informality and applies the analysis to countries in Latin America and the Caribbean. It starts with a discussion on the definition and measures of informality, as well as on the reasons why widespread informality should be of great concern. The paper analyzes informality's main determinants, arguing that informality is not single-caused but results from the combination of poor public services, a burdensome regulatory regime, and weak monitoring and enforcement capacity by the state. This combination is especially explosive when the country suffers from low educational achievement and features demographic pressures and primary production structures. Using cross-country regression analysis, the paper evaluates the empirical relevance of each determinant of informality. It then applies the estimated relationships to most countries in Latin America and the Caribbean in order to assess the country-specific relevance of each proposed mechanism.

Keywords: Labor Markets, Labor Policies, Population Policies, Economic Theory & Research, Debt Markets

Suggested Citation

Loayza, Norman and Servén, Luis and Sugawara, Naotaka, Informality in Latin America and the Caribbean (March 1, 2009). World Bank Policy Research Working Paper Series, Vol. , pp. -, 2009. Available at SSRN: https://ssrn.com/abstract=1372965

Norman Loayza (Contact Author)

World Bank - Research Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Luis Servén

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Naotaka Sugawara

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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