Informality in Latin America and the Caribbean, Vol. 1 of 1

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Informality in Latin America and the Caribbean

Author:	Loayza, Norman V.; Serven, Luis; Sugawara, Naotaka;	Collection Title:	Policy Research working paper ; no. WPS 4888
Country:	Latin America; Caribbean;	Date Stored:	2009/03/30
Document Date:	2009/03/01	Document Type:	Policy Research Working Paper
Language:	English	Major Sector:	Public Administration, Law, and Justice
Rel. Proj ID:	1W-Reforms And Growth- -- P080834;	Region:	Latin America & Caribbean
Report Number:	WPS4888	Sub Sectors:	Central government administration
SubTopics:	Economic Theory & Research; Debt Markets; Labor Markets; Labor Policies; Population Policies	TF No/Name:	TF030675-JAPAN; TF030835-IDA CONSULTANTS POOLED CTF - FY07; TF090153-JAPAN; TF090739-JAPAN; TF030807-JAPAN
Volume No:	1 of 1

Summary: 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.


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