Classifying Latin American Economies: A Degree of Informalisation Approach

Abstract

Given the commonality of employment in the informal economy, this paper moves beyond classifying economies by the composition of their formal economies and instead classifies economies by their degree of informalisation. Analysing International Labour Organisation data on the varying level of employment in the informal economy across 16 Latin American economies, the outcome is to reveal a significant correlation between cross-national variations in the degree of informalisation and cross-national variations in GNP per capita, poverty and social contribution levels. The paper concludes by discussing the implications for theory and policy.