# **2. The Data Set**

The paper focuses on one sector of the informal economy, the corporate or business sector and defines informal firms as those firms that are not registered with the registration office, municipality or tax authority. This definition is used by the Enterprise Survey unit of the World Bank and the motivation behind its simplicity is to facilitate the standardization of methodology for data collection and its comparability across countries.<sup>5</sup> The data used in this paper are from World Bank Informal Enterprise Surveys.<sup>6</sup> These surveys collect data on non-registered business activities and are implemented in parallel to World Bank Enterprise Surveys, which interview formal, private, nonagricultural firms. The Informal Enterprise Surveys are conducted using a uniform sampling methodology in order to minimize measurement error and yield data that are comparable across the world’s economies. In each country, the Informal Enterprise Surveys are conducted in two selected urban centers, which are intended to coincide with the locations for the implementation of the main Enterprise Surveys. The overall number of interviews is pre-determined, and the interviews are distributed between the two urban centers according to criteria such as the level of business activity and each urban center’s population. These urban centers are geographically divided to get the sampling areas and Informal Enterprise Surveys are conducted within clearly identified sampling areas. The total number of sampling areas and the geographical areas they contain are chosen such that firms from different sectors have balanced representation.<sup>7</sup> Moreover the placement of sampling areas in each city is determined based on local knowledge regarding the concentration of informal business activity.

The format of both surveys is very similar with a number of overlapping questions. In terms of differences between the two surveys, the first major difference is that of country coverage. Informal Enterprise Surveys do not cover as many countries as covered by Enterprise Surveys. While Enterprise Surveys cover small, medium and large firms, the Informal Enterprise Surveys do not include any large-

> 5 Defining informality in such a simple way can result in loss of important information about the firms we want to study and understand. For example, firms might be registered for imports and pay import taxes, but not be registered for sales or income taxes. Similarly there can be firms that are registered and pay fees to local market administrators but not be registered with other authorities. Nevertheless, the paper has to follow the definition used by the database utilized for the analysis and readers, while interpreting the results should keep in mind the caveat about this definition.

> 6 The Informal Enterprise Surveys are a good source of data on informal firms and deserve credit for making such data readily available for a cross-section of countries. Still, additional efforts are needed to improve the quality and availability of data on informal enterprises. The National Statistics Departments of countries should increase their effort to collect data on the informal sector to gain a better understanding of different interventions that would be most appropriate for the sector.

> 7 The sample by design has equal number of firms from services and manufacturing sectors.

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