Adriana AnaMaria Davidescu, Professor, PhD, Department of Statistics and Econometrics. Two faces of the same coin: Exploring the multilateral perspective of informality in relation to Sustainable Development Goals. Fostering formal work with digital tools. (ICDEc 2022)

1. Two faces of the same coin:
Exploring the multilateral perspective of informality
in relation to Sustainable Development Goals.
Fostering formal work with digital tools
May 9-11, 2022
ADRIANA
DAVIDESCU
The 7th International Conference on Digital
Economy, Emerging Technologies and Business Innovation
PHD, PROFESSOR, DEPARTMENT
OF STATISTICS AND
ECONOMETRICS
SENIOR RESEARCHER, INCSMPS

2. Introduction
ADRIANA DAVIDESCU
May 9-11, 2022

3. Digital transformation of the labour market is challenging the notion of decent work with new forms of informality.
There is an increasing trend to apply digital tools in policy design and implementation for accelerating the transition to
formality.
The pandemic shows how digitalisation can affect the precarity of informal work.
Mankind is going through a crucial stage of awareness of responsibilities for its own actions that have generated
serious imbalances both in society and at the environmental level, overwhelming its future. Achieving a fair,
prosperous and sustainable future is realised through the adoption of the 2030 Development Agenda, which includes
17 Sustainable Development Goals (SDGs) and has 169 goals.
According to the 2030 Agenda, the concept of “leaving no one behind” (Samman et al., 2019) focuses on reducing
social and economic cleavages and including discriminated and marginalized groups, including those participating in
informal activities.
KEY POINTS
ADRIANA DAVIDESCU May 9-11, 2022

4. THE PANDEMIC
In the light of the recent global situation, international organizations are strengthening the relevance of considering
informality in various concepts, including resilience, sustainable development, social economy or circular economy.
Informality exists everywhere.
Sustainable development somehow has neglected the potential contributions of the informal sector to sustainable
futures.
The pandemic affected the informal sector in at least two ways:
The COVID-19 pandemic has been a harrowing reminder of the precarity of
the vast informal labour market, with even more informal jobs being created
in the economic recovery in developing countries.
- informal firms and workers tended to be found in sectors hard hit by
COVID-19 mitigation measures and
- more businesses and workers were pushed to the informal sector due to
pandemic-induced economic challenges.
ADRIANA DAVIDESCU May 9-11, 2022

5. Digital transformation of the labour market is challenging the notion of
decent work with new forms of informality.
There is an increasing trend to apply digital tools in policy design and
implementation for accelerating the transition to formality.
For national policy makers, designing and implementing a policy framework
for e-formalisation can ensure that digital transformation leads to inclusive
outcomes for informal workers.
Digitalisation of government services, greater access to digital technology
and coordinated policies can foster formal work.
The use of digital tools to increase productivity, improve norms and
regulations, provide incentives, and strengthen enforcement systems can
contribute to the transition.
ADRIANA DAVIDESCU May 9-11, 2022
DIGITALIZATION

6. 1.Exploring the causalities and determinism in
informality: SDG relationships
2.Investigating the research field of informality from a
dual perspective—unilateral versus multilateral—in
relation to Sustainable Development Goals, highlighting
the main potential future research directions
3.Exploring and monitoring the most important
determinants of shadow economy can contribute
tosustainable development.
4.Stepping Outside the Shadows: Informality and
Digitalisation Fostering formal work with digital tools
Goals

7. Defining the
shadow
economy
01 to avoid payment of income, value added or
other taxes;
02 to avoid payment of social security
contributions;
03 to avoid having to meet certain legal labor
market standards (minimum wages, maximum
working hours, safety standards);
“ALL MARKET-BASED LEGAL PRODUCTION OF
GOODS AND SERVICES THAT ARE
DELIBERATELY CONCEALED FROM PUBLIC
AUTHORITIES IN ORDER TO:
04 to avoid complying with certain administrative
procedures (completing statistical
questionnaires or other administrative
forms)”(Schneider, 2010).
In the definition of shadow economy are not included:
-economic crime activities (burglary, robbery, drug dealing);
-informal household economy which consists of all household services and production.
According to the ILO(2002), the term ‘informal economy’ encompasses ‘all economic activities by workers and economic
units that are – in law or in practice – not covered or insufficiently covered by formal arrangements’.

8. Main causes of
informality
tax and social security contribution burdens
quality of institutions
corruption
intensity of regulations
public sector services
tax morale
Deterrence
development of the official economy
self-employment
size of the agricultural sector
use of cash
share of the labour force
economic growth.

9. Methods of
estimation
Surveys
tax auditing
1. Direct approaches
the discrepancy between National Expenditure
and Income Statistics,
Labour Input Method-The discrepancy
between the Official and Actual Labor Force
Monetary Approaches:
Transaction Approach,
Gutmann’s simple currency ratio approach,
Currency demand approach
2. Indirect approaches
1.
2.
3.
3. Latent variable
approach (MIMIC
model)
ADRIANA DAVIDESCU May 9-11, 2022

10. Informality, as a result of individuals’ maximising their payoffs, is a micro phenomenon, but the magnitude and
the scale of policies used to address it can make it seem as a macro phenomenon, with significant implications
for the economy as a whole (Ulyssea, 2020).
Three categories of informality are
distinguished:
1.that which evades regulation,
2.that which avoids regulation, and
3.that to which regulation does not apply
(Kanbur, 2017).
Informality in the literature
Informality represents a creative survival method.
Significant informal expansion leads to imbalances, poverty, and
instability, disturbing the good of society by creating certain
individual advantages.
Bibliometric analysis is an important component of research
assessment techniques, revealing the conceptual, intellectual and
social structure of the research field.
Bibliometric mapping is a three-dimensional depiction of the
relationships between disciplines, fields, areas, and individual
publications or authors (Cobo et al., 2011).
ADRIANA DAVIDESCU May 9-11, 2022

11. Causalities and
determinism in informality:
SDG relationships

12. Causalities and
determinism in informality:
SDG relationships

13. Causalities and
determinism in informality:
SDG relationships

14. Exploring the unilateral-multilateral perspectives of
informality in relation to Sustainable Development Goals.
Data and Methodology

15. Exploring the unilateral-multilateral
perspectives of informality in relation
to Sustainable Development Goals

16. Exploring the unilateral-multilateral
perspectives of informality in relation
to Sustainable Development Goals

18. Exploring the unilateral-multilateral
perspectives of informality in relation
to Sustainable Development Goals

19. Exploring the unilateral-multilateral
perspectives of informality in relation
to Sustainable Development Goals

22. CONCEPTUAL STRUCTURE MAPPING OF THE MAJOR THEMES OF INFORMALITY

27. Exploring the unilateral-
multilateral perspectives
of informality in relation to
Sustainable Development
Goals
Informality represents a complex phenomenon that
can be addressed from different approaches and
perspectives, while comprising various terminologies.
It manifests itself in every country to varying extents
and has gained the attention of both independent
researchers and public institutions in the last periods.
Due to its specificities, informality remains an open
question, and future studies are needed to analyse its
implications for SDG achievement.

28. Researching the Main
Causes of the Romanian
Shadow Economy at the
Micro and Macro Levels:
Implications for
Sustainable Development
Until now, sustainable development has focused mainly on
the formal sector, somehow neglecting the potential
contributions of the informal sector to sustainable futures.
Empirical study (Davidescu et al.2015).
Objective: analyzing the main causes of the Romanian
shadow economy (SE) both at the micro and macro levels,
and how they can make a considerable impact on achieving
a more sustainable future.
An improved MIMIC (Multiple Causes Multiple Indicators)
specification of the causal variables that is grounded in an
evidence-based approach through using the points of view
of the Romanian entrepreneurs.

29. Researching the Main Causes of the Romanian
Shadow Economy at the Micro and Macro
Levels: Implications for Sustainable
Development
CAUSES AT MICRO LEVEL CAUSES AT MACRO LEVEL
tax avoidance
bribery
lack of trust in public officials
poor quality of business
legislation, the poor
government support for
entrepreneurs
high social contributions
a relatively high of corruption
high tax rates
Uncertainty about regulation
policies in increasing
incidences of shadow economic
activity.
self-employment
unemployment
part-time employment
lack of trust in public
institutions.

30. Emphasizing the Main Implications
of the Shadow Economy for
Sustainable Development
UNEMPLOYMENT RATE,
EMPLOYMENT RATE WITH ITS
COMPONENTS (SELF-EMPLOYMENT
OR PART-TIME EMPLOYMENT)
REAL GROWTH
GOVERNMENT EFFICIENCY
SDG8
DECENT WORK
AND ECONOMIC
GROWTH
SDG16
PEACE, JUSTICE,
AND STRONG
INSTITUTIONS.

31. If the policy makers will focus on
-improving the quality of public institutions
the trust of citizens in such institutions,
while also keeping the level of unemployment, self-
employment, and part-time employment under
control,
the magnitude of such a phenomenon can be
diminished, and simultaneously, all of these will
contribute to the achievement of sustainable
development desideratum.
Emphasizing the Main Implications of
the Shadow Economy for Sustainable
Development

32. Fostering
formal work
with digital
tools
Digital transformation of the labour market is challenging the
notion of decent work with new forms of informality.
The pandemic shows how digitalisation can affect the
precarity of informal work
E-formalisation can promote and accelerate transitions to
formal work
Increasing productivity
Improving norms and regulations
Providing incentives
Improving enforcement systems
How e-formalisation can contribute to sustainable, inclusive
development
1.
2.
3.
4.

33. Fostering
formal work
with digital
tools
Digitalisation is redefining work in the informal labour market.
Technology may well accelerate the transition of workers and
enterprises to formality -”the concept is e-
formalization”(ILO(2021), Chacaltana, Leung and Lee, 2018;
Divald, 2021).
From a policy perspective, e-formalisation refers to the
application of digital technologies to support the design and
implementation of policies that:
increase productivity
improve norms and regulations
create incentives
strengthen enforcement systems as pathways towards formality
(Kring and Leung, 2021; Williams, 2021).
For national policy makers, e-formalisation can ensure that
digital transformation will be managed and guided towards pro-
poor and inclusive outcomes for informal workers.
1.
2.
3.
4.

34. Digitalisation and informality: Adapting official
statistics to an evolving labour market
TRADITIONALLY, INFORMAL EMPLOYMENT REFERRED TO
THREE BASIC FORMS OF WORK AND WORKERS (ILO,
1993; ILO, 2003; ILO, 2013)
WITH DIGITALISATION, NEW FORMS OF INFORMALITY
Self-employed: people in business activities that are
not registered with any national authority and
maintain only partial or no accounting records;
Employee: people whose employer does not make
social insurance contributions for them or provide
them access to paid annual leave and paid sick leave
Contributing family workers: people who work
without pay in a business or farm owned by a family
member or have informal jobs by default due to the
nature of their employment.
undeclared employees with no written contract
of employment (Williams & Horodnic, 2019;
Williams & Kayaoglu, 2017).
under-declared employed, who are in declared
employment but receive an official declared
wage and the rest of their salary as an
undeclared ‘envelope wage'.
dependent self-employed, those in an
employment relationship in which they are
formally registered as self-employed but work
under the same working conditions as direct
employees and/or they depend on a single
employer for a main part of their income
=>growing number of workers who are
dependent on digital platforms.

35. The pandemic shows how digitalisation can
affect the precarity of informal work
Informal employment – characterised by low wages, low productivity and the absence of social protection – also
is precarious from workers’ perspective.
The COVID-19 pandemic drove this home: In the first month of the crisis, 80% of informal workers saw their
incomes drop by 60% (ILO, 2020).
Some workers received income support thanks to the use of digital tools.
The government used satellite-based poverty maps, big data mining and machine learning to identify and register
informal sector households so that they could receive social protection support (Kring and Leung, 2021).
In urban areas, the government collaborated with mobile network operators to identify informal workers through
airtime purchase patterns (Davidovic et al., 2021[12]).
ADRIANA DAVIDESCU May 9-11, 2022

36. aggregate effect of three interlinked approaches
and actions:
1)co-ordination across a range of government
policy areas that are relevant for formality
transitions;
2) support to the digital economy;
3) development of e-government services (Kring
and Leung, 2021).
E-formalisation can promote
and accelerate transitions to
formal work
increasing
productivity
improving
norms and
regulations
creating
incentives
strengthening
enforcement
systems
TRANSITIONS FROM
INFORMAL TO MORE
FORMAL EMPLOYMENT
ARRANGEMENTS
(CHACALTANA AND
LEUNG, 2020;
OHNSORGE AND YU,
2021).

37. Technology-based innovation processes in the informal economy improve productivity and the working conditions of
those who work in the informal economy.
The ILO Centenary Declaration for the Future of Work (ILO, 2019[22])
The United Nations Development Programme’s Human Development Report 2019 (UNDP, 2019[20])
On the extent to which government policies underpinning e-formalisation, including the delivery of services through
digital technologies, focus on bettering conditions and expanding opportunities for informal workers.
=> by opening a path from informal to formal work=>e-formalisation can raise productivity and foster greater equity in
labour markets=>contributing to the achievement of the Sustainable Development Goals.
How e-formalisation can contribute to sustainable,
inclusive development
ADRIANA DAVIDESCU May 9-11, 2022

38. How e-formalisation can contribute to sustainable,
inclusive development
Governments and development cooperation partners need to ensure that the
objective of e-formalisation considers transition to formality as the means to
provide decent work for workers in the informal economy.
This should be an integral goal of COVID-19 crisis recovery efforts.
At country level, the best way to design an e-formalisation policy and ensure that
it is implemented and monitored is to engage government representatives,
employers and workers in a tripartite social dialogue.
ADRIANA DAVIDESCU May 9-11, 2022

39. Thank you!