Abstract
This article sees informality in Latin America as a reflection of dysfunctional interactions between individuals and the State and of the latter’s inability to perform adequately in regard to redistribution and the provision of public goods and services. This translates into low rates of social security contribution and coverage; pervasive evasion of tax, labour and business regulations; and low levels of tax collection, law enforcement and trust in the State. The challenge for these countries, the authors argue, is to build more inclusive social contracts underpinned by realistic domestic consensus, taking account of country-specific institutional backgrounds and prevailing social norms.