Government effectiveness vs. Informal employment
Fades after adjusting for income
Across 140 countries, Government effectiveness and Informal employment rise and fall together at r = -0.78 (on a scale from −1 to +1, where 0 means no link). Comparing only countries with similar income (GDP per person) shrinks it to -0.20, which could easily be chance (q = 0.36, allowing for the many pairs tested, and allowing for countries in the same region being alike). So the first figure mostly shows richer countries differing from poorer ones, not a link between these two things.
Comparing countries across the middle half of informal employment, 16% to 83.9% of employment, government effectiveness is worse by 1.39 points at the top of that range than the bottom. Comparing only countries with similar national income, the gap is 0.372 points.
Link before adjusting (r)-0.784p = 2.5e-30 · 140 countries
After adjusting for national income-0.195p = 0.021 · likely range [-0.35, -0.03]
p, allowing for regions0.191standard error 0.129 · 6 regions
Check for luck (q)0.363across 12,497 pairs
How to read these.r runs from −1 (one goes up as the other goes down) to +1 (they rise together), and 0 means no link. Adjusting for national income means comparing countries with the same GDP per person, so differences in wealth can’t explain the link. Income is used in percentage terms, since an extra $1,000 means more to a poor country than to a rich one. p is how likely a link this strong would be if there were really none. Below 0.05 means it is unlikely to be chance. Very small values are written in short form: 1.1e-32 means a decimal point followed by 31 zeros and then 11, so very close to zero. The likely range is where the true figure probably lies, and a range that crosses zero means the link could easily be chance. Countries in the same region tend to resemble each other, so the third figure allows for that, which gives a fairer p. The standard error is the typical size of the error in r. Finally, testing this many pairs means some will look strong by luck alone. A q below 0.05 means this link is unlikely to be one of those.
Government effectiveness · index (approx. -2.5 to 2.5)link with income +0.85 · proxy
Informal employment · % of employmentlink with income -0.88 · proxy
Both of these rise and fall closely with national income, so a strong link between them before adjusting was close to certain. Read the adjusted figure, not the first one.
“Link with income” is how closely each measure tracks GDP per person across countries, from −1 to +1.
Every country as a dot
best-fit line line after adjusting
Four ways to measure the link
| Method | r | p | Countries |
|---|---|---|---|
| Standard (Pearson), not adjusted | -0.784 | 2.5e-30 | 140 |
| By rank (Spearman), not adjusted | -0.782 | 3.9e-30 | 140 |
| Standard (Pearson), adjusted for national income | -0.195 | 0.021 | 140 |
| By rank (Spearman), adjusted for national income | -0.124 | 0.147 | 140 |
The rank version uses only each country’s place in line, from lowest to highest, so a few extreme countries count for less. The adjusted and unadjusted versions use the same 140 countries: those that report both measures and GDP per person. So the gap between them comes from the adjustment, not from a change in which countries are counted. Drop in the size of r after adjusting: +0.589 (a minus sign means it grew).
How solid is it?
Leaving out one country at a time, r ranges from -0.217 (without BIH) to -0.150 (without GUY). The bar above shows that range on a scale from −1 to +1, with the solid line at the full result. The single country that moves r most: GUY (+0.045).
Within each region
Countries are not separate, unrelated cases, and neighbors share a lot. A link that holds inside each region is far more believable than one that shows up only when comparing regions.
| n | r | ||
|---|---|---|---|
| East Asia & Pacific | 19 | -0.08 | |
| Europe & Central Asia | 40 | +0.01 | |
| Latin America & Caribbean | 26 | -0.54 | |
| Sub-Saharan Africa | 40 | -0.11 |
By income third
If the link shows up only in the richest third of countries, it is a feature of rich countries, not a general pattern.
| n | r | ||
|---|---|---|---|
| Poorest third | 47 | +0.08 | |
| Middle third | 46 | -0.07 | |
| Richest third | 47 | -0.36 |
By largest religious group
Countries grouped by a label they share, such as main religion, rather than by a number. Groups of fewer than twelve countries are not shown. These groups differ in income, region and history all at once. So a gap between them is a place to start asking questions, not an answer.
| n | r | ||
|---|---|---|---|
| Christians | 90 | -0.36 | |
| Muslims | 31 | +0.25 |
By last european coloniser
Countries grouped by a label they share, such as main religion, rather than by a number. Groups of fewer than twelve countries are not shown. These groups differ in income, region and history all at once. So a gap between them is a place to start asking questions, not an answer.
| n | r | ||
|---|---|---|---|
| France | 19 | +0.19 | |
| Never a European colony | 12 | +0.03 | |
| Spain | 16 | -0.74 | |
| United Kingdom | 43 | -0.21 |
Without outliers (countries far outside the middle half of countries on either measure, by more than one and a half times the width of that middle half): r = -0.195 after dropping 0 countries.
Two series, one country
Both measures over the years for one country you pick. The two charts are stacked so they share only the years along the bottom.
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Over time, within countries
Everything above compares countries with each other at one moment. This section compares each country only with itself over 25years. So a link here can’t come from anything about a country that stays the same, such as its history, geography, institutions or culture.
Within countries over time, there is no link that is clearly more than chance (r = +0.052, comparing each country only with itself over the years, and each year only with the same year elsewhere). Whatever the cross-country picture shows, countries whose government effectiveness moved did not tend to see their informal employment move with it.
Across countries (adjusted)-0.195for comparison
Within countries-0.122each country vs itself
…and vs the same year elsewhere+0.052q = 0.605 · 82 countries
Year-on-year changes-0.021q = 0.696
Read with care.
- Almost all of this indicator's variation is between countries, not within them, so the within-country estimate rests on a small part of the data.
1,176 country-years (one country in one year), 82 countries, 2000–2024, about 14 years each on average. Share of the variation that happens within countries over time: 2% for Government effectiveness, 4% for Informal employment. The margins of error allow for each country appearing many times, and for each year’s value being close to the year before.
Year-to-year changes are a cautious test, not a final answer. Looking only at changes from one year to the next removes each country’s own trends. But it also makes measurement mistakes louder, which pulls the results toward zero. A near-zero result here is weak evidence of no link, not proof.
With one measure years behind the other
Same year (lag 0): +0.052. A peak away from zero does not show which comes first. These series change slowly — this year’s value is close to last year’s. That makes the curve smooth and nearly symmetric, whatever produced the data. Even a sharp peak at one lag (a gap of some years) would not prove that one measure changes the other.
The data
index (approx. -2.5 to 2.5) | % of employment | Years | |
|---|---|---|---|
| Luxembourg LUX | 2.04 | 1.93% | 2024 |
| Denmark DNK | 1.91 | 2.82% | 2024, 2019 |
| Norway NOR | 1.84 | 1.43% | 2024 |
| Switzerland CHE | 1.84 | 1.48% | 2024 |
| Finland FIN | 1.82 | 2.19% | 2024 |
| Sweden SWE | 1.77 | 2.83% | 2024 |
| Netherlands NLD | 1.75 | 2.63% | 2024 |
| Iceland ISL | 1.65 | 1.97% | 2024, 2020 |
| Ireland IRL | 1.61 | 1.9% | 2024 |
| Germany DEU | 1.55 | 2.49% | 2024, 2022 |
| Austria AUT | 1.51 | 1.32% | 2024 |
| Korea, Rep. KOR | 1.49 | 29.1% | 2024, 2019 |
| Estonia EST | 1.3 | 2.4% | 2024 |
| Lithuania LTU | 1.2 | 3.2% | 2024 |
| France FRA | 1.2 | 3.15% | 2024 |
Kaufmann, D. and A. Kraay, Worldwide Governance Indicators, World Bank
United Nations Global SDG Indicators Database; series compiled by the International Labour Organization (8.3.1) and the UN Office on Drugs and Crime (16.3.2)
Sources
Informal employment
Share of employment that is informal
International Labour Organization · via Our World in Data · CC BY 3.0 IGO · updated annual
Workers with no contract, no social protection or no registered employer, as the ILO (the UN's labour agency) makes them comparable across national labour force surveys. The World Bank's copy of this series was retired, so it comes from the UN's database for the Sustainable Development Goals.
How this was computed
Data used: most recent value in 2010-2025; values come from 2012–2025. To adjust for income, each measure is first predicted from GDP per person (in percentage terms, on a log scale) with a straight-line fit. Only what is left over is then compared. This is called a partial correlation. The line is drawn the standard way (ordinary least squares), which picks the line that comes closest to all the countries at once. The error margins allow for countries in the same region resembling each other, using 6 World Bank regions. The q-value corrects for testing all 12,497 pairs at once, using the Benjamini–Hochberg method. Underlying data last updated DYB 2024. How the country data works · explore Government effectiveness and Informal employment
This page shows that two measures go together. It does not show that Government effectiveness changes Informal employment, or the reverse. These figures also describe countries, not individual people. See the ecological fallacy.
More links with Government effectiveness or Informal employment
- Informal employment vs Retirement age, men before +0.63 → after adjusting +0.57
- Informal employment vs Population 65+ before -0.87 → after adjusting -0.54
- Informal employment vs Median age before -0.88 → after adjusting -0.51
- Government effectiveness vs Liberal democracy before +0.67 → after adjusting +0.49
- Governance score vs Government effectiveness before +0.64 → after adjusting +0.48
- Government expense vs Informal employment before -0.52 → after adjusting -0.46
- Informal employment vs PISA maths before -0.81 → after adjusting -0.46
- Informal employment vs Rule of law before -0.79 → after adjusting -0.45