Contents -- Foreword -- Acknowledgments -- Abbreviations -- Overview: Informality: Exit and Exclusion -- The razón de ser of the informal sector: Adding exit to exclusion -- Workers: A mix of opting out and exclusion -- Firms: Little gain, high costs, or weak enforcement? -- Need for more effective and legitimate institutions -- Summing up: Policy implications of the report -- Informality and the development agenda -- Note -- References -- Chapter 1: The Informal Sector: What Is It, Why Do We Care, and How Do We Measure It? -- Introduction: What is informality? -- Informality and the relationship between the individual and the state -- Three margins of informality -- Measuring the informal sector -- Correlations among measures and trends over time -- Conclusions -- Annex -- Notes -- References -- Chapter 2: The Razón de Ser of the Informal Worker -- Informal work: Adding exit to exclusion -- The sectors of informal labor: Characteristics and dynamics -- Motivations for participation in informal work -- Conclusions -- Notes -- References -- Chapter 3: Informality, Earnings, and Welfare -- Compensating differentials, comparative advantage, and informal work -- The question of equal pay for equal work in the informal and formal sectors -- Informality and self-rated welfare -- Conclusions and policy implications -- Notes -- References -- Chapter 4: The Informal Labor Market in Motion: Dynamics, Cycles, and Trends -- Informality through the lens of gross labor force dynamics -- Drivers of the increase in informality -- Conclusion -- Notes -- References -- Chapter 5: Microfirm Dynamics and Informality -- Conceptual framework: Firm dynamics and institutional development -- Microfirm dynamics in Latin America -- Informality among microfirms -- Conclusions -- Notes -- References -- Chapter 6: Informality, Productivity, and the Firm.

Informality among registered firms -- Firm-level determinants of informality -- Impact of informality on firm productivity and economic growth -- Conclusions -- Notes -- References -- Chapter 7: Informality, Social Protection, and Antipoverty Policies -- Informality and social protection: Why policy makers should care -- The state of social protection in Latin America and the Caribbean -- Private risk management and rationale for public social protection -- Challenges for social protection in the face of informality -- Reengineering social protection to protect all citizens -- Potential costs of social protection reform: Financing essential cover -- Managing the transition from here to there -- Conclusion -- Notes -- References -- Chapter 8: The Informal Sector and the State: Institutions, Inequality, and Social Norms -- Social norms, the state, and informality -- The tax side of the social contract in Latin America -- Inequality, taxes, and transfers -- Informality: A reflection of a broken social contract? -- Conclusions -- Notes -- References -- Boxes -- Overview -- 1 Informal workers in Latin America and the Caribbean: Their profile, motivations, earnings, and welfare -- 2 Government failures in the design of social protection systems in Latin America and the Caribbean -- Chapter 1 -- 1.1 The ILO definition of informality -- 1.2 Indirect methods of estimating informality -- 1.3 Schneider and Enste in the new world: Checking MIMIC estimates against Mexican data -- Chapter 2 -- 2.1 Home-based work: Exploitation or flexible work arrangement? -- 2.2 Data from rotating panels in Argentina, Brazil, and Mexico -- 2.3 Informal self-employment: Risky and informal, or risky because informal? -- 2.4 Special informal employment surveys: What can we learn from them? -- Chapter 4 -- 4.1 Conceptual issues in gross worker flows.

4.2 Simulated effects of labor market legislation on the size of the informal sector -- Chapter 5 -- 5.1 Patterns of entry and exit in industrialized countries -- Chapter 7 -- 7.1 Social protection-strengthening people's abilities to manage risk and promoting long-term productivity, growth, and development -- 7.2 The comprehensive insurance framework-providing guidance on social protection policy making -- 7.3 Extending health insurance coverage by correctly aligning risk-pooling instruments -- 7.4 Old-age protection in the new millennium: Chile's proposed pension reform -- 7.5 De-linking health coverage from employment status: Spain's shift to general-revenue financing of essential social insurance -- Chapter 8 -- 8.1 The extreme of informality and exclusion: Being undocumented -- 8.2 Local taxation and social norms -- 8.3 Tax compliance, social norms, and trust in the state: The contrasting cases of Chile and Argentina in the late 1990s -- 8.4 Earned income tax credits: Transfers that encourage formal employment -- 8.5 Expansion of private security services in Managua -- 8.6 Negotiating tax reform and the start of the social contract, Chile, 1990 -- Figures -- Overview -- 1 Labor market informality and income per capita -- 2 Trends in informality, by various definitions -- 3 Probability of transition between formal salaried and self-employment in Mexico -- 4 Rate of urban employment across sectors, by age in Brazil, 2002 -- 5 Informal workers across firm size -- 6 Male entry into and exit from self-employment -- 7 Advantages of formalization reported by IFC-surveyed firms -- 8 Underreporting of tax and social security contributions, by firm size -- 9 Economically active population contributing to the pension system -- 10 Informality versus inequality -- 11 Tax morale and state capture -- 12 Self-employment and quality of institutions (governance).

Chapter 1 -- 1.1 Margins of informality -- 1.2 Methods for measuring the informal sector -- 1.3 Selected measures of informality -- 1.4 Informality and gender: women versus men (ages 25-64) -- 1.5 Informal salaried workers (legal definition) across firm size and time -- 1.6 Distribution of manufacturing sector firms according to worker registration in Mexico -- 1.7 Distribution of manufacturing sector firms according to tax compliance in Mexico -- 1.8 Global correlation of measures of informality with GDP -- 1.9 Trends in informality by various definitions -- Chapter 2 -- 2.1 Relative sector sizes and wages under a nominal wage rigidity -- 2.2 Relative sector sizes and wages in the presence of a labor tax -- 2.3 Rate of urban employment across sectors, by age -- 2.4 Probabilities of transition among sectors of employment -- 2.5 Absolute mean duration of labor force status -- 2.6 Propensity to move to self-employment from different sectors -- 2.7 Transition between self-employment and out of labor force, by gender -- 2.8 Employment sector allocation by gender, marital status, and parental status in Mexico -- 2.9 Propensity to move to informal salaried status from different sectors -- 2.10 International comparison of desired and actual self-employment rates -- 2.11 Earnings gain from voluntary movement to informality in Mexico -- Chapter 3 -- 3.1 Propensity to informal employment by firm size and economic sector, 2005-06 -- 3.2 Propensity to informal employment by education and tenure, 2005-06 -- 3.3 Propensity to informal employment by age, gender roles, and work preferences, 2005-06 -- 3.4 Distribution of hourly earnings for workers in urban areas of Argentina and Bolivia, 2005-06 -- 3.5 Earnings cost of informality in urban areas of Argentina, Bolivia, and the Dominican Republic.

3.6 Fraction of workers who are income-poor and self-rated poor, by education and occupational group -- 3.7 Impact of informality on self-rated poverty -- 3.8 Direct impact of having access to social protection through a family member on self-rated poverty -- 3.9 Differences between actual labor incomes and the level of income needed to avoid self-rating poverty in Argentina -- Chapter 4 -- 4.1 Formal share of the labor force and unemployment, Brazil and Mexico -- 4.2a Probability of transition between formal salaried and self-employment, Brazil and Mexico -- 4.2b Probability of transition between formal salaried and informal salaried, Brazil and Mexico -- 4.3 Involuntary transition to self-employment in Mexico -- 4.4 Searching while employed, Mexico -- 4.5 Decreased availability of formal sector jobs without segmentation -- 4.6 Probability of transition to unemployment (separation rate), Brazil and Mexico -- 4.7 Probability of transition from unemployment (job-finding rate), Brazil and Mexico -- 4.8 Informal employment reaction to the business cycle -- 4.9 Relative sector shares and earnings, real exchange rate -- 4.10a Variation of informality rate (social protection definition) -- 4.10b Variation of informality rate (productive definition) -- 4.11 Decomposition of changes in informality (social protection definition) for urban salaried workers -- 4.12a Labor force participation, rate of formality, and unemployment, Brazil -- 4.12b Labor force participation, rate of formality, and unemployment, Colombia -- 4.13 Actual and predicted size of the industrial formal sector, Brazil -- 4.14 Informality rate for salaried workers in Greater Buenos Aires -- 4.15 Informal salaried versus formal salaried, Mexico, relative earnings and sector size -- 4.16 Evolution of informality across age groups -- 4.17 Labor legislation and related variables, Peru.

Chapter 5.