Out of the Shadows: A Classification of Economies by the Size and Character of Their Informal Sector

Work, Employment and Society, October 2014, Vol. 28(5) 735-753

19 Pages Posted: 27 Dec 2015

See all articles by Colin Williams

Colin Williams

University of Sheffield - School of Management

Date Written: 2014

Abstract

Given that 60 per cent of the global workforce is in the informal sector, this article develops a typology that classifies economies according to, firstly, where different countries sit on a continuum of informalization and, secondly, the character of their informal sectors. This is then applied to the economies of the 27 member states of European Union (EU-27). Finding a clear divide from east to west and south to north in the EU-27, with the more informalized and wage-based informal economies on the eastern/southern side and the less informalized and more own-account informal economies on the western/Nordic side, it is then revealed that formalization and more own-account informal sectors are significantly correlated with wealthier and more equal (as measured by the gini-coefficient) countries in which there is greater labour market intervention, higher levels of social protection and more effective redistribution via social transfers. The article concludes by discussing the implications for theory and practice.

Keywords: economic development, European Union, informal sector, shadow economy, underground economy

JEL Classification: H26, J46, J48, K34, K42, O17, P2, P3

Suggested Citation

Williams, Colin, Out of the Shadows: A Classification of Economies by the Size and Character of Their Informal Sector (2014). Work, Employment and Society, October 2014, Vol. 28(5) 735-753, Available at SSRN: https://ssrn.com/abstract=2708441

Colin Williams (Contact Author)

University of Sheffield - School of Management ( email )

15 Conduit Road
Sheffield, S10 1FL
United Kingdom

HOME PAGE: http://https://www.sheffield.ac.uk/management/staff/williams/index

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