STRENGTHEN Publication Series

Employment Impact Assessments: Integrating the informal sector into social accounting matrices and computable general equilibrium models

STRENGTHEN Publication Series Working Paper No. 6

This paper reviews methodologies for the ILO’s Employment Assessment project with respect to the integration of the informal sector in social accounting matrices and CGEs. A series of theoretical models are developed to show how this can be done. The models are organized according to whether the presence of the informal sector is due to capital limitations, functional informality, versus juridical informality, which may arise as a competitive strategy on the part of entrepreneurs. The goal is to offer to policymakers some perspectives on how the informal sector could be incorporated into formal models of the economy.