The informal economy in comparative perspective: Theory, policy and reality
- The India Journal of Labour Economics
- 66(2), Apr-Jun, 2023: p.395-420
This article seeks to interrogate, with recent evidence, dominant theories about the informal economy and dominant policy responses to the informal economy. It does so from a comparative perspective using recent official national data and survey findings from around the world. The article opens with a summary of the first-ever global estimates of the size and composition of informal employment and the links between informal employment and poverty. Links between informal employment and inequality are also considered. Section 2 examines the dominant theories of structural transformation and of the drivers of informality through the lens of recent data which indicate that some of the key assumptions underlying these theories have not stood the test of time. Section 3 begins by examining dominant approaches to the informal economy, focusing on formalization and urban planning. It then presents an alternative enabling approach based on demands by organizations of informal workers, some of which have been enshrined in recent global norms. The concluding Section 4 calls for a paradigm shift in theories of—and policies towards—the informal economy.- Reproduced