2026-07-01http://hdl.handle.net/123456789/414122This 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.application/pdftext/plainCC BY 3.0 IGOhttp://creativecommons.org/licenses/by/3.0/igo/World BankABUSEACCOUNTINGADULT POPULATIONADVERSE EFFECTAGRICULTUREBANK POLICYBENCHMARKCONSUMER GOODSCONSUMPTION EXPENDITURECONTRACT ENFORCEMENTCORRELATION ANALYSISCOUNTRY RISKCREDIT INSTITUTIONSCREDIT PROVISIONCURRENCYDEMOGRAPHIC FACTORSDEMOGRAPHIC PRESSURESDEMOGRAPHIC TRANSITIONDEMOGRAPHIC TRENDSDEVELOPING COUNTRIESDEVELOPMENT POLICIESDRUGSDUMMY VARIABLEECONOMIC DEVELOPMENTECONOMIC FREEDOMECONOMIC GROWTHECONOMIC PERFORMANCEECONOMIC POLICIESECONOMICSEDUCATIONAL ATTAINMENTEDUCATIONAL LEVELEMPLOYMENTEMPLOYMENT TRENDSENFORCEMENT POWEREXCHANGE CONTROLSEXCHANGE RATEFINANCIAL INSTITUTIONSGDPGDP PER CAPITAGOVERNMENT EXPENDITUREGOVERNMENT EXPENDITURESIMPORTANT POLICYINCIDENCE OF POVERTYINCOMEINCOME DISTRIBUTIONINCOME INEQUALITYINFORMAL ECONOMIESINFORMAL ECONOMYINFORMAL EMPLOYMENTINFORMAL SECTORINSTRUMENTINTELLECTUAL PROPERTYINTERNATIONAL BANKINTERNATIONAL LABOR ORGANIZATIONINTERNATIONAL MARKETSJUDICIAL SYSTEMLABOR FORCELABOR MARKETSLABOR ORGANIZATIONLABOR PRODUCTIVITYLABOR REGULATIONSLABOURLABOUR MARKETLEGAL PROTECTIONLEGAL SYSTEMLESS DEVELOPED COUNTRIESLEVEL OF EDUCATIONLEVELS OF EDUCATIONLOANLOAN APPLICATIONSLOCAL CURRENCYMACROECONOMICSMARKET ECONOMYMARKET INDEXNEGATIVE EXTERNALITYNPLPENSIONPOLICY RESEARCHPOLICY RESEARCH WORKING PAPERPOPULATION DIVISIONPOVERTY ALLEVIATIONPRICE CONTROLSPRIVATE CAPITALPRODUCTIVITY GROWTHPROGRESSPUBLIC POLICYPUBLIC SERVICESREAL GDPREAL WAGEREGIONAL DUMMYREGRESSION ANALYSISREGULATORY AUTHORITIESREGULATORY FRAMEWORKREGULATORY FRAMEWORKSREGULATORY REGIMERESPECTRETIREMENTRETURNSRISK DIVERSIFICATIONRURAL POPULATIONRURAL POPULATIONSSECONDARY SCHOOLINGSELF EMPLOYEDSELF EMPLOYED WORKERSSELF EMPLOYMENTSKILLED LABORTAXTAX REVENUESTAXATIONTELECOMMUNICATIONSTOTAL EMPLOYMENTTOTAL LABOR FORCETRANSPORTATIONUNEMPLOYMENTUSE OF RESOURCESWORKERSWORLD POPULATIONYOUNG PEOPLE