Informality and Social Protection: Preliminary Results from Pilot Surveys in Bulgaria and Colombia

There is a wide agreement on the fact that a large informal economy leaves many individuals without social protection and reduces government's tax revenue and social security contributions. However, it remains an open question what really drives informality, namely whether workers are simply trapped out of the formal sector or, at least some of them, choose it because it offers better alternatives than a formal job. The policy implications are clearly different in the two cases. In order to shed light on this important issue, the authors propose a household survey instrument to assess the links between informality and social protection. It can be implemented either through a stand-alone survey or by adding a specific module to an existing general survey such as the World Bank's Living Standards Measurement Study. After describing the main survey instrument, the study presents the results of two pilot surveys, carried out in Bulgaria and Colombia, to test the effectiveness of the questionnaire and improve its design. After the introduction is presented, the remainder of the paper is organized as follows. Section 2 discusses the design of the basic questionnaire on the informal sector. Since the instrument can be used also as a stand-alone survey, some questions are quite standard both in their content and format: in what follows, the study will focus on the parts that are not. Section 3 describes in detail the pilot surveys and the adaptation of the questionnaire to country-specific issues. Section 4 asks how representative is the sample of the two pilots. Section 5 presents some descriptive results emerging from the two pilots, and Section 6 examines how results differ according to informality status of respondents. Finally, Section 7 offers concluding remarks.