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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
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Towards a Better Understanding of the Informal Economy
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- Dan Andrews1, Aida Caldera Sánchez1, Åsa Johansson1
- Author Affiliations
- 1: OECD, France
- 30 May 2011
- Bibliographic information
It is important to understand the nature and drivers of informality, as its social and economic consequences are wide-ranging. This paper critically reviews the current state of cross-country research on informality and discusses how existing data sources can be more effectively employed and extended to shed light on the link between public policies and informality. A number of interesting findings emerge. The informal economy is multi-faceted and a wide range of definitions and measures are required to capture its diverse activities. However, most existing – and widely used – cross-country estimates of informality suffer from large measurement problems, which reduce the reliability of existing empirical evidence on the extent and drivers of informality. Accordingly, future research on informality should be closely linked to obtaining better data, particularly at the household and firm levels.
- tax evasion, measurement issues, regulations, informal economy, property rights
- JEL Classification:
- H11: Public Economics / Structure and Scope of Government / Structure, Scope, and Performance of Government
- H26: Public Economics / Taxation, Subsidies, and Revenue / Tax Evasion and Avoidance
- J53: Labor and Demographic Economics / Labor-Management Relations, Trade Unions, and Collective Bargaining / Labor-Management Relations; Industrial Jurisprudence
- K0: Law and Economics / General
- O17: Economic Development, Innovation, Technological Change, and Growth / Economic Development / Formal and Informal Sectors; Shadow Economy; Institutional Arrangements