# **B. Surveys of households: Pros and cons**

Like firm surveys, surveys of households can also capture information both about workers (whether they are employees or are working in a household enterprise) and firms (as reported by workers, or as pertaining to the household enterprise). Examples include LFSs and LSMSs.

Such household surveys can be conducted in two phases, or as combined household/enterprise surveys. The LSMS, for example, pursues information on employment and household enterprises in a single phase. Such surveys have a labor module (asking each member about labor and for employees, sometimes traits of the firm/employer) and a household enterprise module (asking for firm level details about every household enterprise [HHE] activity). And the two sections should cross-check. (If someone is selfemployed in the labor module, there should be at least one enterprise in the HHE module; and vice versa). In the DIAL (Développement, Institutions et Mondialisation) 1-2-3 surveys, the first questionnaire (1) identifies households with informal firms and the second questionnaire (2) collects details about those businesses. In some cases, the second questionnaire is implemented later (requiring a revisit to the survey area) but in other cases it is collected during the same phase of field work.

Among the limitations of household surveys is the fact that employees are unlikely to reliably report firm details. Something like firm size threshold (say <5 or >4) is likely to be reported reliably. However, they may not provide satisfying information on firm decisions and firm behavior. It is possible to use household surveys to indicate the distribution of small informal firms, and then interview separately a set of firm managers according to this distribution, in order to get better firm data. (See Ethiopia RICA) There are some examples of employee-employer matched survey efforts, but not many from developing countries.

Another important limitation of household surveys is that it unlikely that these surveys can offer sufficient coverage of large firms (through a sample of their workers) when these enterprises are concentrated in a country (in a specific city or location).

An important lesson from existing studies in many regions is the strong heterogeneity across informal firms. Yet this heterogeneity may be usefully exploited in drawing analytical conclusions or in developing policy – suggesting different policies for different segments of the sector. Such heterogeneity among informal firms also implies the need to stratify survey samples for particular groups of firms. These groups can usually be identified according to country knowledge and specific issues. New work may benefit from the experience of earlier studies on this point. It points to the fact that without booster samples and stratification, the existing national household surveys regularly produced in the statistical systems (such as LSMSs, HBSs, LFSs) may not have appropriate samples to offer in-depth analysis of the informal sector. But, nonetheless, they may offer a first cut glance at the extent of informality in a country.

While HH surveys are essential for building a sample frame of informal household and micro-enterprises, the stratification strategy referred to above will inevitably point to a class of firms that are fundamentally informal in significant aspects of their behavior, and yet are listed on official business, tax or customs registries. For sampling these firms, access to official business and tax registries is essential – even if no firms are identifiable by name (though activity sector and size are critical). Finally, it is highly useful to develop a list of control firms – formal firms that otherwise have characteristics similar to at least some of 12