M. Ayhan Kose, Franziska Ohnsorge, Shu Yu, 27 January 2022

Informality compounded the damage of the Covid-19 pandemic in emerging market and developing economies, and it is now threatening to hold back the recovery. This column argues that policymakers need to employ innovative measures, tailored to country circumstances, to help the informal sector cope with the consequences of the pandemic. Policies to better reach informal workers, such as online platforms and databases, as well as progress in digitalisation and financial inclusion can all help support vulnerable populations during times of crisis. 

Niklas Engbom, Gustavo Gonzaga, Christian Moser, Roberta Olivieri, 07 June 2021

Relatively little is known about the patterns of inequality in developing countries, despite their importance for designing social and economic policies. This column analyses administrative and household data to describe the trends in earnings inequality and dynamics in Brazil since late 1980s. The findings suggest that the observed fall in earnings inequality and volatility may have been driven by the process of formalisation and other changes within the informal sector. 

Rafael Dix-Carneiro, Pinelopi Goldberg, Costas Meghir, Gabriel Ulyssea, 05 March 2021

Shifts into and out of the informal sector are important margins of labour market adjustment to economic shocks, particularly in developing countries. This column develops a structural equilibrium model of trade and informality to study the effects of trade openness on unemployment, welfare, productivity, and wage inequality. Higher trade openness leads to strong positive effects on aggregate welfare and productivity, decreases in overall wage inequality, and moderate increases in unemployment. Modelling the informal and non-tradable sectors is crucial to reaching a comprehensive understanding of the effects of trade in developing countries.

Ravi Kanbur, Arnab Basu, Nancy H Chau, 18 July 2011

The authors of CEPR DP8485 analyze two stylized views of formal and informal labor markets: 1) that the informal sector is competitive and 2) that contract enforcement in the informal sector is not possible. They argue these two "facts" are incompatible. In informal sectors, the lack of contract enforcement does in fact bestow market power on employers over workers, distorting competitiveness in these markets.

Rita Da Costa, Juan Ramón de Laiglesia, Ángel Melguizo, Emmanuelle Martinez, 12 February 2011

Informal employment remains pervasive in Latin America and the Caribbean. Many workers, not just the disadvantaged, are informal and contribute irregularly, if at all, to a pension plan. This column argues that governments should consider extending social pensions and stimulating individual saving.

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