Measurement and Determinants of Informal Employment: Evidence from Pakistan

Abstract

This article estimates the size and determinants of informal employment in Pakistan by applying four empirical measures using data from Pakistan Labor Force Survey (2017-18).The recent debate on informality in the labor market has led to a renewal of informal employment measures. Regression analysis is used to shed light on the differences between these measures. We show that the incidence of informal employment varies across different measures. According to at least one measure, 94.53 percent of employment is informal, but 71.4 percent of workers are informal according to the all four measures. However, the determinants of informal employment are roughly stable across the different measures. The paper concludes by suggesting that an appropriate measure is therefore of great importance for policy analysis and the design of appropriate strategies to reduce informality.