2.1 Formal and Informal Sector Firm-Size Distribution

Figure 2.1, panel a shows that 80 percent of informal employment is concentrated in firms with fewer than five employees. This pattern of the firm-size distribution is in sharp contrast with the formal sector’s firm-size distribution (figure 2.1, panel b) where almost one-half of employment is accounted for by firms with 500 workers or more.

Despite the large share of employment at the top of the size distribution of formal firms, the average firm size in the sector is below the average firm size of more developed economies. Figure 2.2 shows the average firm size conditional on firms with 10 or more workers around the world, hence covering formal sector enterprises, and it shows a

FIGURE 2.1 Formal and Informal Sector Firm-Size Distribution

Source: Annual Survey of industries (ASi) and National Sample Survey (NSS) data from 2015–16.