Informality and poverty in Ecuador

Abstract

This paper uses national representative data from the Ecuadorian Family Expenditure survey to study the determinants of poverty and informality in the country, taking into account the two-way relationship between these two phenomena. The main contribution of this paper is to present new empirical evidence on this relationship for a developing country where more than 60% of workers are in the informal sector. The results support the view of a heterogeneous informal market, in which informal work is both a demand-led phenomenon and a voluntary and primarily supply-led form of employment.