Synthesis documents

Cape Town Conference: World Bank, 2010, Turkey - Informality: Causes, Consequences and Policies (K. Karakurum-Ozdemir, Day 2, Afternoon Session)

    This report examines the nature of the informality in Turkey and its effects on the Turkish economy. While in Turkey firm non-registration is uncommon, underreporting of revenues and wages as well as non-registration of workers with the social security system are more prevalent. Informal employment is most common in agriculture. The prevalence of informal employment not only represents a loss of tax revenue to the government, but also an increase in economic and social vulnerability. On the other hand, growing formalisation is likely to increase demand for more skilled workers, at the expense of less skilled ones.

    The report is organized in six chapters. The second chapter introduces definitions and the conceptual framework for the analysis conducted. The third chapter provides a portrait of informality in Turkey, outlines certain issues of measurement, and presents the main trends using various decompositions. The fourth and fifth chapters discuss the costs (consequences) and the causes of informality, respectively, with a specific focus on informal employment. The final chapter presents a suggested integrated policy approach to reduce informality and provides concluding remarks.

    Summary of results
    The report recommends to strengthen auditing capacity, effectiveness and targeting of enforcement, to ease labour market regulations (particularly on hiring fixed-term and part-time workers and laying off workers), and to communicate effectively with the public on the costs of informality and the benefits of formalisation. In introducing such formalisation policies, it is also important to recognise that the transition may bring costs, for example job losses, and compensatory policies may also need to be included in the overall "policy package."

    Associated Activities and Documents
    Synthesis documents
    »Donor Committee Conference: Business Environment Reform and the Informal Economy, Cape Town, South Africa, 12-15 April 2010