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Assessment ofInformal Employmentin Georgia © 2025 International Bank for Reconstruction and Development / The World Bank1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Website:www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusionsexpressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governmentsthey represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors,denominations, links/footnotes and other information shown in this work do not imply any judgment on the part of The World Bankconcerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank,all of which are specifically reserved. Rights and Permissions The material in this publication is subject to copyright. Because the World Bank Group encourages dissemination of its knowledge,this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Attribution— Please cite the work as follows: World Bank. 2025.Assessment of Informal Employment in Georgia. Washington, DC:World Bank Group. Translations— If you create a translation of this work, please add the following disclaimer along with the attribution:This translation was not created by The World Bank and should not be considered an official World Bank translation. The World Bankshall not be liable for any content or error in this translation. Adaptations— If you create an adaptation of this work, please add the following disclaimer along with the attribution:This is an adaptation of an original work by The World Bank. Views and opinions expressed in the adaptation are the soleresponsibility of the author or authors of the adaptation and are not endorsed by The World Bank. Third-party content— The World Bank does not necessarily own each component of the content contained within the work.The World Bank therefore does not warrant that the use of any third-party-owned individual component or part contained in the workwill not infringe on the rights of those third parties. The risk of claims resulting from such infringement rests solely with you. If youwish to reuse a component of the work, it is your responsibility to determine whether permission is needed for that reuse and toobtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images. Any queries on rights and licenses, including subsidiary rights, should be addressed to the Publishing and Knowledge Division,The World Bank, 1818 H Street NW, Washington, DC 20433, USA; email:pubrights@worldbank.org Cover and other pictures: Designed and generated by Team Design at Midjourney.Report and Cover design: Team Design & A.K. Contents AbbreviationsviiAcknowledgmentsviiiEXECUTIVE SUMMARY2INTRODUCTION6CHAPTER ONE:Characteristics of Non-Agricultural Informality in Georgia15CHAPTER TWO:Potential Drivers of Informal Employment21CHAPTER THREE:Impact of Informal Employment on Poverty and Inequality27CHAPTER FOUR:Policy Recommendations384.1.Addressing Labor Market Limitations384.2.Enhancing Regulatory and Legislative Frameworks39AREAS FOR FUTURE RESEARCH42References44ANNEXA:Background andEconometricAnalysis onNon-AgriculturalInformality50A.1.Descriptive Labor Market and Informality Patterns50A.2.Econometric Results on Earnings and Informality55ANNEX B:Measurement and Composition of Informal Employment63B.1.DefiningEmploymentInformality—anOverview63B.2.Impact ofMethodologicalChanges inLabor Force SurveyComposition65B.3.Who are theNon-AgriculturalInformalWorkers? AnEconometricAnalysis69 Figures Figure1Non-agricultural informality, 2017–20219Figure2Huppi-Ravallion decomposition for informality rates by sector, 2017–20219Figure 3Total, non-agricultural, and agricultural informality in Georgia, 202110Figure 4Evolution of the informal economy, size based on the DGE model, 202010Figure 5Top performers and low-performing students11Figure 6Non-agricultural informality rates across sectors16Figure 7Formal versus informal sectoral share of workers16Figure 8Contract benefits for informal employees17Figure 9Distribution of non-agricultural informal workers by region17Figure 10Informality rates and number of informal workers for Tbilisi, other urban, and rural18Figure 11Non-agricultural informality rate by gender19Figure 12Non-agricultural informality rates by age group and educational attainment19Figure 13Share of businesses, by size (%)22Figure 14Use of financial services by firms, by size (%)23Figure 15Secondary dummy coefficient for earning regressions, by gender and formal versusinformal24Figure16OLS vocational/professional dummy coefficient f