Global estimates of informal economies and new insights for 152 countries (1997-2022): Using an enhanced modelling approach

Using an enhanced modelling method, this paper presents new estimates of the Informal Economy (IE) for 152 countries from 1997 to 2022. We address several limitations from previous estimates of the IE, notably missing data issues, time-invariant country characteristics, and scaling issues with exogenous estimates of informality. By incorporating country-specific fixed effects, the model offers more reliable results. Our findings reveal significant variation in the drivers of IE between high-income and non-high-income countries. In terms of normative implications, our results underscore the need for tailored policies in addressing the formalisation of informal activities in countries with varying income levels.