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# Informal Sector X1 = Employees X2= Self-employed X3= Employers X4= Unpaid Workers - PowerPoint PPT Presentation

ANNEX. If, we assume that a number of variables observed (latent variables), then what the method does is to extract a group of indicators to characterize a variable whose behavior has not been observed (Informality Index). Defining occupation following positions jobs :

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If, we assume that a number of variables observed(latent variables), then what the method does is to extract a group of indicators to characterize a variable whose behavior has not been observed (Informality Index). Defining occupation following positions jobs:

With this these, the index is obtained from informality relative proportions in which each position represents the employment of the total, thereby reducing the dimensionality of the original set of variables.

Informal Sector

X1 = Employees

X2= Self-employed

X3= Employers

X4= Unpaid Workers

X5= Other Workers

Informal employment in formal

X1 = Self-employment in agriculture or subsistence

X2 = unpaid workers in different units Informal Sector

X3 = Paid Domestic Service

X4 = Salaried workers unprotected sectors working to formal

X5 = Unprotected workers without remuneration fixed in formal

Consider that:

X1= Vector of weights TA NAICS subsector with order of 56x1:

Thus :

X2=Vector of weights TCP NAICS subsector with order 56x1:

Thus :

X3=Vector of weights Emp NAICS subsector with order56x1:

Thus :

X4=Vector of weights UW NAICS subsector with order of 56x1:

Thus :

X5=Vector of weights OT NAICS subsector with order of 56x1:

Thus :

Econometric Estimation in with Software

Year of study: 2008

Principal Components of correlation:

Yields the following vector characteristic:

Vector 1 order 5x1=Vector Characteristic (VC)

Squares of the elements of Vector Characteristic(CVC)

Principal Component (CP) = (Vector Characteristic)*(square root of Eigen value)

Weighting and Scoring=(Elements of Vector Characteristic)/(Principal Component)

Proportion of Variance Explained

Informality Index by Economic Activity Subsector, vector order 56x1

(Matrix X1, X2, X3, X4,X5 of order 56x5)*(Vector of Weights order 5x1)

Adding Weights Vector, vector order 56x1 = S by subsector of X1, X2, X3, X4 y X5

Average Weights Vector, vector order 56x1= by subsector de X1, X2, X3, X4 y X5

Yields some measures of central tendency: mean, standard deviation and variance of the Index of Informality by sector of Economic activity:

Mean ( )

Standard Deviation (σ)

Variance (σ2)

Index of Informality Standardized by Subsector of Economic Activity (IIE)

vector order 56x1 = Index of Informality (56x1)