Labor Informality: General Causes

Abstract

The article examines the main causes of labor informality in order to verify the validity of classical theories that explain unemployment in market economies and its relationship to informality. Methodologically, the project was based, in the empirical part, on international statistics, comparing the evolution of labor market structure in a combined sample of highly industrialized countries and other less industrialized ones. Empirical evidence supports the conclusion that the classical economic theory of Marxist origin is inefficient to explain the causes of unemployment in contemporary market economies, as well as it fails to satisfactorily explain informality. On the contrary, we conclude that the theory in question is more relevant to explain informality in centrally planned economies where this phenomenon has been present even more significantly than in free market economies.