Evaluating the Variations in Employment Relations Across Developing! Economies: A Degrees of Informalisation Approach

Abstract Conventionally, cross-national variations in employment relations systems have been compared by analysing the different characters of their formal economies (e.g., whether they are control, market or mixed economies). Recognising the persistence and even growth of informal employment, this paper examines the cross-national variations in the degree of informalisation of employment relations and then evaluates critically whether such variations are associated with: under-development (modernisation theory); high taxes, corruption and state interference (neo-liberal theory), or inadequate state intervention to protect workers from poverty (political economy theory). Reporting International Labour Organisation surveys of informal employment in 41 developing economies, the finding is that the share of the non-agricultural workforce in informal employment ranges from 83.6 per cent in India to 6.1 per cent in Serbia. Evaluating critically how these cross-national variations can be explained, support is found for the modernisation and political economy theses that associates greater informalisation with under-development and inadequate state protection of workers from poverty and the neo-liberal corruption thesis. No evidence is found that greater informalisation is associated with the neo-liberal theses of higher taxes and more state interference. The theoretical and policy implications are then discussed.