Defining and Measuring Informality in India

38 Pages Posted: 25 Jul 2016 Last revised: 11 Jan 2019

See all articles by Bhaskar Neog

Bhaskar Neog

IIT Jammu; IIT Jammu

Bimal Kishore Sahoo

Indian Institute of Technology (IIT), Roorkee - Department of Humanities and Social Sciences

Date Written: July 25, 2016


Even though informality, work quality and worker well-being are closely knit issues, there is a dearth of studies which explore the issue of informality as deficiency of workers’ well-being or poor job-quality. Our study is an attempt to contribute to the literature in this direction. We propose an alternative method of defining informality by distinguishing workers based on multiple dimensions of work quality. Our empirical exercise is guided by the Capabilities framework as developed by Amartya Sen, Martha Nussbaum among others. The study uses National Sample Survey Office (NSSO) data for the three years 2004-05, 2009-10 and 2011-12. Cluster analysis is used to distinguish workers into good-quality and bad-quality jobs. We also apply the Fuzzy Set Theory to compare the work quality of formal and informal workers under different dimensions. Finally, the study investigates the trends in informality from the point of view of alternative definitions and investigate its characteristics. Our results indicate a significant overlap in the trends and determinants of informality under alternative definitions. Further, we find extensive work-based insecurity among the informally employed, especially among certain segments. The above results emphasize the need for urgent policy initiatives, especially towards certain sections of the population, to improve working conditions among the informal.

Keywords: Informal Employment; Unorganised Sector; Quality of Employment; Decent Work; Capabilities theory; Fuzzy sets; Cluster Analysis

JEL Classification: J46, C35, C38, J81

Suggested Citation

Neog, Bhaskar and Sahoo, Bimal Kishore, Defining and Measuring Informality in India (July 25, 2016). Available at SSRN: or

Bhaskar Neog (Contact Author)

IIT Jammu ( email )


IIT Jammu ( email )


Bimal Kishore Sahoo

Indian Institute of Technology (IIT), Roorkee - Department of Humanities and Social Sciences ( email )


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