Model:

InformalSectorDynamics = β0 + β1 * MinimumWage + β2 * RegionalDisparity + β3

* LaborMarketCharacteristics + β4 * DemographicFactors + β5 * PolicyFactors + ε

1.Independent variables:

MinimumWage: Proxy for minimum wage policies.

RegionalDisparity: Proxies for regional disparities.
LaborMarketCharacteristics: Proxies for labor market characteristics.
DemographicFactors: Proxies for demographic factors.
PolicyFactors: Proxies for policy factors.

As previously mentioned, here are some potential proxies for each variable:
MinimumWage:
Average Nominal Wage Rate
RegionalDisparity:
Regional GDP per Capita
Human Development Index (HDI)
LaborMarketCharacteristics:
Unemployment Rate
Labor Force Participation Rate
DemographicFactors:
Population Size
Education Attainment
PolicyFactors:
Government Spending on Skill Development
Social Protection Expenditure
More Details.
Proxies for Minimum Wage (β1 * MinimumWage):
Average Nominal Wage Rate: You can use the average nominal wage rate as a proxy for the
minimum wage. This data is usually available from official labor market surveys or reports
conducted by government agencies. Source: Pakistan Bureau of Statistics (PBS) Labor Force
Surveys.
Proxies for Regional Disparity (β2 * RegionalDisparity):
Regional GDP per Capita: GDP per capita for different regions in Pakistan can be used as a proxy
for regional economic disparity. Source: State Bank of Pakistan (SBP) or Pakistan Bureau of
Statistics (PBS) regional economic reports.
Human Development Index (HDI): HDI is a composite index that measures the level of human
development in different regions. It can serve as a proxy for regional disparities. Source: United
Nations Development Programme (UNDP) Human Development Reports.
Proxies for Labor Market Characteristics (β3 * LaborMarketCharacteristics):
Unemployment Rate: The unemployment rate can be used to capture labor market conditions.
Source: Pakistan Bureau of Statistics (PBS) Labor Force Surveys.
Labor Force Participation Rate: This rate indicates the proportion of the working-age population
that is actively participating in the labor force. Source: Pakistan Bureau of Statistics (PBS) Labor
Force Surveys.
Proxies for Demographic Factors (β4 * DemographicFactors):
Population Size: Population data for different regions in Pakistan can be used to represent
demographic factors. Source: Pakistan Bureau of Statistics (PBS) population census data or
demographic reports.
Education Attainment: The percentage of the population with different education levels can be
used as a proxy for human capital. Source: Pakistan Bureau of Statistics (PBS) education
statistics.
Proxies for Policy Factors (β5 * PolicyFactors):
Government Spending on Skill Development: The amount of government spending on skill
development programs can serve as a proxy for policy efforts in this area. Source: Ministry of
Planning, Development, and Special Initiatives (MOPDSI) or relevant government reports.
Social Protection Expenditure: Government expenditure on social protection programs can be
used as a proxy for policy efforts to support vulnerable populations. Source: Ministry of Social
Welfare and Special Education or relevant government reports.

2.Dependent Variable