# **c. Sensitivity analysis**

This subsection presents the results of a series of sensitivity analyses of the JQM using six alternative income thresholds and dependency ratios: (1) the lower-middle-income international poverty line— US$3.20 (PPP 2011)—keeping the same dependency ratio, (2) the upper-middle-income international poverty line—US$5.50 (2011 PPP)—keeping the same dependency ratio, (3) the flexible international poverty line according to the income level of the country and keeping the same dependency ratio, (4) keeping the extreme international poverty line—US$1.90 (PPP 2011)—using a dependency ratio of 2, (5) each country’s median income, and (6) each country’s minimum wage.

The results show that average job quality and country rankings are quite stable in comparing the main specification and specifications using the alternative income thresholds (annex figures A1–A6). Furthermore, sensitivity tests are conducted by giving more relevance to the income dimension than to other dimensions because it can be argued that remuneration is the most important aspect of job quality. The two sensitivity tests in this regard are (1) giving the income dimension a weight that doubles the weights given to the other dimensions and (2) keeping equal weights for all dimensions, but censor job quality as zero (the lowest possible score) if the daily wage is below the minimum income threshold to move a family out of poverty, as in Brummund, Mann and Rodríguez-Castelán (2018). The results are robust to these alternative specifications producing results that are similar to those obtained with the main specification (annex figures A7–A8).

# **d. Value added of the JQM to the standard definitions of informality**

The claim of this paper is that the proposed job quality index provides more comprehensive information on the quality of jobs across countries relative to a single indicator, such as informal employment, that is used widely in the literature. In particular, the proposed JQM includes two additional dimensions on income and working conditions that are not part of the typical official informality measures used to assess job quality across countries. To illustrate the differences between our proposed JQM and the standard formality indicator, the analysis next constructs the standard definitions of informality, and then compares these to the JQM. The main finding is that workers at different levels of job quality may be classified in single categories of the standard binary definitions of informality, and thus critical information on the quality of jobs is lost.

To conduct the comparative analysis between the JQM and informality, the ex post harmonized SEDLAC database is used.<sup>22</sup> SEDLAC correspond to a subset of the main data set used for the analysis in this paper and includes standardized definitions of informality. The two standardized informality definitions used are (1) productive informality, which classifies a worker as informal if the firm has five or fewer employees, and (2) legal informality, which classifies a worker as informal if the job does not have pension benefits. The data contain information on more than 430,000 wage workers across 12 Latin American countries. These two definitions of informality capture different underlying working conditions. Thus, 30 percent of workers are informal according to the productive informality definition, and 60 percent of workers qualify as informal using the legal definition. Within these two groups of informal wage workers, there is large variation both in the informality shares and in the observed job quality across countries for productive

> 22 SEDLAC (Socio-Economic Database for Latin America and the Caribbean), Center for Distributive, Labor, and Social Studies, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, La Plata, Argentina, and Equity Lab, Team for Statistical Development, World Bank, Washington, DC, https://www.cedlas.econo.unlp.edu.ar/wp/estadisticas/sedlac/.

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