Notes

1. Based on ILOSTAT data. The International Labour Organization defines the informal economy as all economic activities by workers and economic units, for instance, firms that are de jure or de facto not covered or insufficiently covered by formal arrangements. See ILOSTAT (dashboard), International Labour Organization, Geneva, https://ilostat.ilo.org/. 2. Andrews et al. 2021 provide a useful definition of economic inclusion as the gradual integration of individuals and households into broader economic and community development processes. This integration is achieved by addressing multiple constraints or structural barriers faced by the poor at different levels: the household (for example, human and physical capacity), the community (social norms), the local economy (access to markets and services), and formal institutions (access to political and administrative structures). 3. The division is a ministry-level body headed by a federal minister. The division houses

Pakistan’s flagship unconditional cash transfer program, the Benazir Income Support Program and related cash transfer programs, as well as the Pakistan Poverty Alleviation Fund. 4. It is possible that the poorer labor market earnings of General Education Development graduates reflect a belief among employers that high school graduates have better skills, rather than actual differences in socioemotional or cognitive skills between these two groups. 5. The Raven score or Raven’s Progressive Matrices measures learning outcomes that capture the level of intelligence and motivation needed to complete a task (Hanushek and

Woessmann 2008). 6. An essential part of the assessment involves asking respondents relevant questions to evaluate their literacy proficiency in understanding vocabulary, sentence, and passage. Literacy proficiency in this case is defined according to the number of questions answered correctly, divided by the time used to answer. The quantitative analysis covered in this chapter controlled these three variables in the Sri Lanka regressions as proxies for cognitive skills. See annexes 6A and 6B for details on the Pakistan LSS and Sri Lanka STEP survey data and the quantitative analysis. 7. This is the intuition described by Heckman, Stixrud, and Urzua (2006). 8. Inverse hyperbolic sine (IHS) transformation was applied to the earnings variable, which is used frequently for variables that have zero or negative values. It can be approximately interpreted as the natural log transformation. 9. Work experience—measured by age and age-squared—also has a significant impact on earnings. In Pakistan, one more year of work experience increases monthly earnings by 16 percent, conditional on the observation of monthly earnings. In Sri Lanka, the marginal effect of work experience on hourly earnings is 13 percent in the overall sample, which increases to 16 percent in the formal sector and becomes insignificant in the informal sector.

These findings are similar to those of Jedwab (2019), although he also finds that the returns to work experience are lower in low-income countries than in high-income countries. 10. Using the same dataset, López Bóo (2016) finds that preschool attendance, early nutrition, the caregiver’s education, and primary school attendance are among the factors that influence cognitive development. 11. Sánchez Puerta, Valerio, and Gutiérrez Bernal (2016) provide a cross-country review of programs that aim to boost socioemotional skills. 12. This is the Jawtno (Care) Program administered by the Local Government Division.