As per capita income increases, the proportion of non-professional own-account falls, to 20% in upper middle income countries and 7% in high income countries. At the same time, as per capita income increases from low to upper-middle income countries the proportion of employers and professionals increases from 2% in low income countries to over 4.5% in upper middle income and high income countries.

Fewer than half of workers in low income countries are wage and salaried employees (see Table 1a). This proportion increases as the per capita income of a country grows, and almost 90% of workers in high income countries are wage and salaried employees. In addition, as countries, develop the proportion of employees in the formal sector increases, from less than 10% of workers in low income countries to almost half of all workers in upper middle income countries (Table 1c). We do not have direct estimates of informal and formal sector employees for high income countries, but we expect that most wage employees are formal in high-income OECD countries.

Table 2 presents the proportion of workers in each category by region of the world. For most regions, the proportion of workers in each category follows the existing patterns by income group. For example, in regions characterized by low and lower-middle income countries (East Asia and the Pacific, Middle East and North Africa (MENA), South Asia and Sub-Saharan Africa)<sup>8</sup> the proportion of formal sector employees is relatively small and the proportion of non-professional own account worker is relatively large (Table 2b and 2c). At the other end of the income scale, in high income countries of Europe and North America, the proportion of formal sector employees is relatively large and the proportion of non-professional own account worker is relatively small. In Latin America, composed mostly of middle income countries, the proportion of workers in each category is between the low income and high income countries.

Middle income countries in Europe and Central Asia combine elements of high income European and Central Asian countries with middle income Latin American countries. For example, the proportion of self-employed workers in developing European and Central Asian countries is very low, 5%, compared to 11% in high income Europe and Central Asia and 32% in middle income Latin America. On the other hand, the proportion of informal employees in the developing economies of Europe and Central Asia is high, 45%, compared to 23% in Latin America and almost zero in high income Europe and Central Asia.

# **VI. Earnings Penalties and Premiums for Self-Employment and Informal Employees around the World**

In Table 3 we report the results of the estimation of wage penalties (-) and premiums (+) for all self-employed workers vs. all employees, non-professional-own account workers vs. formal and informal employees, employers and professionals vs. formal and informal employees, and informal vs. formal employees.

> 8 It should be noted that our MENA sample is limited to only Yemen and Djibouti while our South Asia sample is represented by Bangladesh and Pakistan which might not be representative of the entire regions.

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