Informality in Turkey, using variousdefinitions, and despite the signs of a recent decline incertain segments of the economy, is widespread. The level ofinformality is not excessively high, however, taking intoaccount Turkey's level of income. While firmnon-registration is not very common, underreporting ofrevenues and wages and non-registration of workers with thesocial security system are more prevalent. This reportargues that success in reducing informality requires anintegrated policy response. While no single'sufficient' policy tool will be likely toincrease formalization significantly, a combination ofpolicies may move the economy to a new equilibrium withhigher formalization. The report discusses the need tostrengthen auditing capacity, effectiveness and targeting,to ease labor market regulations, and to communicateeffectively with the public on the costs of informality andthe benefits of formalization. This report is organized insix chapters. The second chapter introduces definitions andthe conceptual framework for the analysis conducted. Thethird chapter provides a portrait of informality in Turkey,outlines certain issues of measurement, and presents themain trends using various decompositions. The fourth andfifth chapters discuss the costs (consequences) and thecauses of informality, respectively, with a specific focuson informal employment. The final chapter presents asuggested integrated policy approach to reduce informalityand provides concluding remarks.
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