The latter is computed as a sum of population 15-64 years old and above 65 years old multiplied by the employment-population ratio of 15+ years old. The comparison indicates that some countries have more than a 10 percent deviation in employment data during one or more years over the period of 2000-2016.<sup>16</sup> Countries with more that 10 percent deviations are excluded from the analysis. Country and sectorspecific annual GDP-employment elasticities for average elasticities approach are constructed by dividing annual employment growth by GDP growth. Similarly, changes in labor productivity are divided by GDP growth to discount the share of economic growth explained by improvements in labor productivity, following the decomposition approach. Finally, average of annual elasticities over the period 2000-2016 are used as estimates of country and sector GDP-employment elasticities.

To study the relationship between labor productivity and informal employment, sector-specific informal employment shares (in agriculture, manufacturing and services) were computed using harmonized labor force surveys using the World Bank’s International Income Distribution Data Set (I2D2).<sup>17</sup> Informal employment is defined for the purposes of this paper as those individuals that declare to be self-employed or are non-paid employees.<sup>18</sup> Several stylized facts emerge when comparing informal employment across countries, country income groups and sectors; such as prevalence of informality in low-income countries and in the agriculture sector. Figure 1 shows that lower-income countries tend to have higher informal employment than highincome ones; and this pattern is consistent across all aggregate sectors. Low-income countries have sizable employment informality and thus under-utilized labor due to the limited number of formal jobs available in the economy relative to the size of the working-age population. In most cases, informal jobs do not provide sufficient income, benefits, or certainty for workers who are either poor or vulnerable to poverty in the face of economic shocks. In addition, the share of informal employment is the highest in agriculture, reaching on average 70 to 80 percent in low-income and lower-middle-income countries. In low-income countries most of these workers are part of subsistence farmer households that are either poor or vulnerable to poverty. Manufacturing and service sectors have similar patterns across income groups, although service sectors have on average slightly higher informality compared to manufacturing.

> 16These countries are excluded from the analysis and include Albania, Angola, Bangladesh, Bosnia and Herzegovina, Botswana, Burkina Faso, Cabo Verde, Comoros, Republic of Congo, Djibouti, Dominican Republic, Equatorial Guinea, Fiji, Gabon, Ghana, Guam, Guinea, Iraq, Lesotho, Mali, Mauritania, Moldova, Montenegro, Myanmar, Namibia, New Caledonia, Niger, Oman, Peru, Samoa, Serbia, Sierra Leone, Solomon Islands, Somalia, St. Lucia, Tajikistan, Turkmenistan, Uganda, and Yemen.

> 17 The I2D2 a global harmonized labor force survey database that provides comparable indicators on both household and individual levels across countries and over time, from 600 surveys for 120 countries.

> 18 While there are alternatives definitions of informal employment in the literature, the ability to measure it varies substantially across countries, depending on quality and availability of related indicators in labor force surveys.

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