Informal employment and the social contract

This paper empirically tests whether individual-level informality status is linked to a weak social contract, as measured through individual perceptions of its various aspects. Accounting for workers’ heterogeneity and a possible simultaneity between informality status and attitudes towards institutions, the paper shows that informal workers are systematically more dissatisfied with the social contract, as compared to formal workers. The paper enriches the literature by looking at a broad range of aspects of the social contract. The results show that informality is associated with a lower level of confidence in labour unions, in parliament, in civil services; a lower satisfaction with the healthcare system, the way the government performs its duties, the quality of healthcare, and the city setting. The paper concludes with some policy implications.