Abstract
Abstract Abstract Informality, measured as the share of the employed who do not have access to social security, is high in Lebanon and the Syrian Arab Republic. This paper uses new data from the 2010 Lebanon and Syria matched employer-employee surveys, which include modules that directly test for ability (Raven’s progressive matrices) and self-reported personality characteristics in addition to a detailed section on job quality. The analysis of differentials in earning, self-reported attitudes toward jobs, working conditions, and self-rated satisfaction across formal and informal jobs shows that, even after controlling for measured ability and personality traits, there is a significant formality premium. Moreover, in Lebanon, informal workers are significantly more likely than formal workers to want to change jobs. These findings suggest that much of the observed informality in these two countries might not be due to individual choice but more likely to exclusion from formal markets. JEL codes H53, H55, J23, J24, J31, J32, J42, J71, J81, K31, M51, O53
Highlights
Informality is best understood as a multifaceted phenomenon, influenced by the relationship that the state establishes with private agents through regulation, monitoring, and the provision of public services
We focus on informality at the individual level whereby those employees who are not registered through their firms in the national social insurance schemes are considered informal
Given its focus on workers’ vulnerability, the paper defines informal workers as those who are not registered in the national social security scheme
Summary
Informality is best understood as a multifaceted phenomenon, influenced by the relationship that the state establishes with private agents through regulation, monitoring, and the provision of public services (see, for example, the discussion in Gatti et al 2012). Given its focus on workers’ vulnerability, the paper defines informal workers as those who are not registered in the national social security scheme Using this definition, it characterizes differences in labor market outcomes between formal and informal workers along a rich set of individual and firm characteristics (including age, education, firm size, location, and sector). These datasets include basic data on the socioeconomic characteristics of workers and data on wages (starting and current levels, including bonuses), job benefits, working conditions, and variables indicating the individuals’ overall job satisfaction, which allow us to compare formal and informal workers across these dimensions They contain information on workers’ skills assessment, including cognitive and noncognitive tests that we used to proxy individual ability and personality traits, allowing the analysis to compute the formality premium controlling for such traits. We capture noncognitive skills with a dummy taking the value of one if an individual is above the average self-rated score for a particular trait
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