Informal Labour and Credit Markets: A Survey.

Further support of the segmented view can be found in Martin (2000) who shows that
in Mexico

• the unemployment rate in the 1990’s was low (3.7 per cent) and composed mainly
by well-educated (SF 9).¹⁵

This evidence has been formalized by Satchi and Temple (2009) in a search matching
model where workers who do not find a job are unlikely to have any other choice than to
turn to the informal sector.¹⁶

Furthermore, Wahba and Zenou (2005) show that

• in Egypt, 70 per cent of workers obtain a formal job through formal methods (SF
10)

This fact is examined further in Zenou (2008) and in a general equilibrium framework by
Batini et al. (2009).

Ihrig and Moe (2004) reviewed in section 6.1 attempt to explain the following stylized
facts:

• a negative and convex relationship between informal employment and country’s stan-
dard of living (SF 11)

• a positive relationship between informal employment and tax rate (SF 12)

Refer to Figures 1 and 2 in Ihrig and Moe (2004).

Finally, as far as the link between informality and (gender) inequality is concerned,
various studies, including Chen (2007) report that informal employment is an important
source of employment for women than for men in LDCs and globally the following stylized
facts emerge:

• a significant gap in earnings within the informal economy with employers at the top
segment followed by their employees (regular salaried) and by casual workers (SF
13)

markets.

¹⁵In general, many studies show that unemployment rates in developing countries are low compared to
OECD countries. See for instance Bosch and Maloney (2006) and Bosch and Maloney (2007).

¹⁶ See section 4.2.

11

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