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The question posed by this work is two-fold: firstly, does domestic activity determine participation in informal activities to a proportionate degree? Secondly, does domestic activity and participation in informal activities result in better income distribution and a lowered level of poverty? In order to answer the first question, the size of the informal economy is first measured on the bases of declared monetary incomes and of full incomes (including monetary values of time use) through a model of a complete demand system for the self-employed and wage earners. The cross-sectional dataset used in these estimations is obtained by matching the Time Use Survey of 2006 with the Household Budget Survey over the years 2007 to 2011, inclusive. To attempt to answer the second question, we measure the Gini Index for extended income (informal earnings incorporated into declared income) and extended full income (informal earnings included in full incomes). We will also decompose income inequality using the Oaxaca-Blinder decomposition method for both working groups. The income inequality gap appears to favor self-employed workers who have informal earnings, while wage earners are worse off through their participation in informal activities. We adopt a concentration index to decompose the total effect of informal earnings on income inequality and to derive the elasticity of variables contributions to income inequality and the sensitivity of these contributions to informal earnings. According to our results, informal earnings contribute a great deal to inequality, expressed as 37.8% which decreases to 35.5% when time use values are added into the estimation; a conclusion which is consistent with the results of the informal economy estimation.
