Informal Economy

12 Key excerpts on "Informal Economy"

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  Important Economic Systems

  • (Author)
  • 2014(Publication Date)
  • Orange Apple

    (Publisher)

  ____________________ WORLD TECHNOLOGIES ____________________ Chapter- 1 Informal Sector & Economic Growth Informal Sector The informal sector or Informal Economy is the part of an economy that is not taxed, monitored by any form of government or included in any gross national product (GNP), unlike the formal economy. Examples are barter and gift economy. Although the Informal Economy is often associated with developing countries, where up to 60% of the labour force (with as much 40% of GDP) works, all economic systems contain an Informal Economy in some proportion. The term informal sector was used in many earlier studies, and has been mostly replaced in more recent studies which use the newer term. The English idioms under the table and off the books typically refer to this type of economy. The term black market refers to a specific subset of the Informal Economy in which contraband is traded; where contraband may be strictly or informally defined. Definition Informal economic activity is a dynamic process which includes many aspects of economic and social theory including exchange, regulation, and enforcement. By its nature, it is necessarily difficult to observe, study, define, and measure. No single source readily or authoritatively defines Informal Economy as a unit of study, although the work of economic anthropologist Keith Hart was integral in defining the term. To further confound attempts to define this process, informal economic activity is temporal in nature. Regulations (and degrees of enforcement) change frequently, sometimes daily, and any instance of economic activity can shift between categories of formal and informal with even minor changes in policy. Given the complexity of the phenomenon, the simplest definition of informal economic activity might be: any exchange of goods or services involving economic value in which the act escapes regulation of similar satchel acts.

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  The Political Economy of Development in Kenya

  • Kempe Ronald Hope, Sr.(Authors)
  • 2011(Publication Date)
  • Continuum

    (Publisher)

  In this work, the Informal Economy is defined as consisting of those economic units and workers (both professionals and nonprofession-als), who engage in commercial activities outside of the realm of the formally established mechanisms for the conduct of such activities. It includes all forms of unregistered or unincorporated small-scale productive, vending, and service activities, and also comprises all forms of employment without secure contracts, worker benefits, or social protection both inside and out-side informal enterprises. That is, the Informal Economy is characterized 86 The Political Economy of Development in Kenya by: (1) informal employment in informal enterprises including employers, employees, own account operators, and unpaid contributing family work-ers; and (2) informal employment outside informal enterprises including domestic workers, casual or day laborers, temporary or part-time workers, industrial outworkers, and unregistered or undeclared workers (Hope, 2001; ILO, 2002). Whereas the old definition of the Informal Economy included all those who work in informal enterprises, the new expanded concept includes all remunerative work—both self-employment and wage employment—that is not recognized, regulated, or protected by existing legal or regulatory frame-works, as well as nonremunerative work undertaken in an income-producing enterprise (ILO, 2002). This new definition embodies a major conceptual shift. It provides a new approach in defining informality in terms of employ-ment status rather than, as in the earlier conceptualization, to enterprise char-acteristics. The old thinking on the Informal Economy defined employment as the self-employed in informal enterprises and their hired employees and assumed that informal entrepreneurs, not informal workers, were avoiding informality.

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  International Business Strategy in Emerging Markets

  • Jonah C. Pardillo(Author)
  • 2020(Publication Date)
  • Society Publishing

    (Publisher)

  Activities of Informal Economy can incorporate doing unspecialized jobs or offering types of assistance for which you are paid in real money. Models include home remodels, vehicle fixes, and so forth. These informal activities can be viewed as semi lawful in that the work is considered “genuine.” But in light of the fact that it is unregulated, and no assessments are paid, it isn’t viewed as a major aspect of the economy of formal labor market. Other informal economic activities, including wrongdoing and medication managing, are viewed as less authentic or “criminal.” The casual monetary exercises that are legitimately connected with vagrancy in Canada incorporate parts of the sex exchange, begging, and squeegeeing. As per an effective research in Canada, individuals encountering homelessness take an interest in the Informal Economy not in view of their inborn fault, but instead, on the grounds that the conditions of homelessness shut individuals out of the standard work market and power them to discover choices to produce pay. A preferred position of casual monetary movement for individuals encountering homelessness is that it permits them to have money close by consistently so as to address quick issues, for example, the food purchase. 7.6. THE NATURE OF Informal Economy For long, business analysts didn’t consider the Informal Economy deserving of contemplating. It was not until Hart (1973) reported the economic activities in the low-salary groups in Ghana that the market analysts and sociologists paid heed to the marvel that exists at the edges of the proper economy. In another work, Portes, Castells, and Benton, (1989) defined the different informal segments that exist outside the administrative domain. Innovation and Entrepreneurship in the Informal Economy 183 Informal segments exist in various structures and across developed and developing economies.

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  Poverty, Livelihoods, and Governance in Africa

  Fulfilling the Development Promise

  • K. Hope(Author)
  • 2008(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  It provides jobs, reduces unemployment and underemployment, bolsters entre- preneurial activity, increases incomes, and improves the livelihoods of the most vulnerable group in African society the working poor. This chapter examines and analyzes the nature of the Informal Economy and its growth and socioeconomic impact in Africa. 28 P ov e r t y, L i v e l i h o o d s, a n d G ov e r n a n c e The Nature of the Informal Economy in Africa The Informal Economy is defined here as consisting of those eco- nomic units and workers (both professionals and nonprofessionals) who engage in commercial activities outside of the realm of the “for- mally established mechanisms for the conduct of such activities. Included in such activities are barters (exchanging of goods and/or services for other goods and or services); the importation of scarce consumer goods; the importation of production inputs and spare parts; the sale and exchange of hard currency for local currency at black market rates and vice versa; the sale and exchange of certain controlled goods and resources, such as gold, diamonds, and even arms, for hard currency or other goods and services; and unregistered or unincorporated small-scale productive and service activities. It is a process of income generation characterized by the single feature of being unregulated by the institutions of society in an environment in which comparable activities are regulated. In 2003, the International Conference of Labour Statisticians (ICLS) adopted guidelines that incorporated the whole of informal- ity. Consequently, employment in the Informal Economy now also includes informal employment outside the informal sector.

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  The Informal Economy and Employment in Brazil

  Latin America, Modernization, and Social Changes

  • D. Coletto(Author)
  • 2010(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  3 In the climate of change just outlined, scholars, experts, and policy makers have also begun to inquire into the lives of those millions of people who inhabit, constantly or intermittently, with great enthusiasm and equally profound desperation, the outskirts of the largest cities of the world’s South and North. Hawkers, craftsmen, shoe-shiners, laborers, 2 ● The Informal Economy and Employment in Brazil street artists, pickpockets, petty dealers trading from their own homes, workers without labor contracts, providers of services, and other profes- sionals, operating externally to the formal part of the economy, demon- strate a surprising capacity to provide for themselves and to produce resources that enable millions of people to survive. This widespread attention to various labor and economic transactions has stimulated (and in some aspects made necessary) a search for a defini- tion able to cover and label all the manifold forms assumed by the human art of getting by. In this regard, the term “Informal Economy” was used for the first time by two studies realized in the late 1960s and early 1970s: the first of them, Informal Income Opportunities and Urban Employment in Ghana, resulted from research carried out in 1965–1968 by Keith Hart (Hart 1973); the second, an empirical survey by International Labor Organization (ILO) experts and researchers, was conducted in Kenya in the early 1970s (ILO 1972). Since these two studies, interest in the infor- mal economy has increased—though somewhat erratically—over the past 40 years, and empirical and theoretical studies have multiplied. In some cases, such studies have differed according to the context in which the phenomenon has been analyzed: in particular, a cleavage has emerged between the more industrially advanced countries and the weaker coun- tries as regards both interpretations and, in certain respects, the methods used to understand and quantify the Informal Economy.

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  Economic Sociology

  A Systematic Inquiry

  • Alejandro Portes(Author)
  • 2010(Publication Date)
  • Princeton University Press

    (Publisher)

  Informality is the ob- verse of regulated, predictable economic behavior and, for this reason, it is intrinsically subversive, challenging many expectations about how such behavior occurs in reality. 132 • Chapter Seven Definitions Origins of the Concept The concept of Informal Economy was born in the third world, out of a series of studies on urban labor markets in Africa. Keith Hart, the eco- nomic anthropologist who coined the term, saw it as a way of giving expression to “the gap between my experience there and anything my English education had taught me before.” In his view, the empirical ob- servations about popular entrepreneurship in Accra and other African capitals were clearly at odds with received wisdom from “the western discourse on economic development.” 5 In his report to the International Labour Organization (ILO), Hart postulated a dualist model of income opportunities of the urban labor force, based largely on the distinction between wage employment and self-employment. The concept of informality was applied to the self- employed. Hart emphasized the notable dynamics and diversity of these activities that, in his view, went well beyond “shoeshine boys and sellers of matches.” 6 This dynamic characterization of the informal sector was subsequently lost as the concept became institutionalized within the ILO bureaucracy, which essentially redefined informality as synonymous with poverty. The Informal Economy was taken to refer to an “urban way of doing things” characterized by: (1) low entry barriers in terms of skill, capital, and organization; (2) family ownership of enterprises; (3) small scale of operation; (4) labor intensive production with outdated technol- ogy; and (5) unregulated and competitive markets. 7 Additional characteristics derived from this definition included low levels of productivity and a low capacity for accumulation.

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  The Informal Economy in Global Perspective

  Varieties of Governance

  • Abel Polese, Colin C. Williams, Ioana A. Horodnic, Predrag Bejakovic, Abel Polese, Colin C. Williams, Ioana A. Horodnic, Predrag Bejakovic(Authors)
  • 2017(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  1 © The Author(s) 2017 A. Polese et al. (eds.), The Informal Economy in Global Perspective, International Political Economy Series, DOI 10.1007/978-3-319-40931-3_1 Introduction: Informal Economies as Varieties of Governance Abel Polese, Colin C. Williams, Ioana A. Horodnic, and Predrag Bejakovic A. Polese (*) Tallinn University and Tallinn University of Technology, Tallinn, Estonia C.C. Williams University of Sheffield, Sheffield, UK I.A. Horodnic Faculty of Economics and Business Administration, Alexandru Ioan Cuza University of Iași, Iași, Romania e-mail: [email protected] P. Bejakovic Institute of Public Finance, Zagreb, Croatia The growing body of research on informality, that has its origins in the work of Hart (1973) in Ghana, and which has resulted in a burgeoning literature comprising thousands of new articles ever year, has moved in recent years a long way from the monodisciplinary approach and lack of dialogue between disciplines that conventionally plagued the study of the informal sector. Initially approached from the perspectives of economic anthropology (1973) and labour studies (ILO 1972) that dealt, respectively, with Informal Economy and informal labour, studies on informality have increasingly broadened in terms of disciplines and geographical scope. 2 Drawing from a range of diverse theoretical approaches, recent scholarship on informality, informal practices, diverse and shadow economy have tended to agree on two major points. First, informality is—although in different forms and affecting different areas of a state’s competence— present both in the global North and global South. Second, informality is not necessarily a transitory phenomenon nor it is limited to sweatshops and is not used only by the poor and marginalised.

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  Religion and Poverty

  Pan-African Perspectives

  • Peter J. Paris(Author)
  • 2009(Publication Date)
  • Duke University Press Books

    (Publisher)

  An-other critique came from Rex Nettleford, who is convinced that a greater impact would be achieved in the struggle against poverty if theology and theologians would concentrate their e√orts on the informal sector of the economy. ∞≤ The Global Market and Its Interest in the Informal Economy The global market economy, through the local and regional economy as its agency, is interested in the informal sector for three reasons. First, the informal sector is an area of production and trade where money circulates that could be transformed into capital for the benefit of the formal sector. More often than not it circulates without entering the banks and also eludes the tax system. The banking system, as a financial wing of the global econ- The Informal Economy | 81 omy, always wants to siphon away the accumulated income of the informal sector without returning any of it to the people. Instead of doing that, it puts capital beyond the reach of the informal sector. This can be seen in the many advertisements that are put out by banks, which clearly target the accumu-lated finances of the informal sector. Some banks and insurance companies even go to the extent of sending agents to convince the operators of the spaza economy to deposit their incomes with them. The draw is clearly the attraction of that accumulated income. The operators of the informal sector are encouraged to deposit their money in the banks and other financial institutions, but when they try to secure loans, they are suddenly confronted by collateral requirements that they cannot satisfy. These loan conditions include for example, formal qualifications in managerial skills and experi-ence in running an enterprise in the formal economy, financial literacy, and a clearly determinable market share. Such requirements lead them to put their own collective savings in the banks, insurance companies, and other finan-cial institutions beyond their reach and exclusively within the reach of the formal sector.

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  Encyclopedia of Consumer Culture

  • Dale Southerton(Author)
  • 2011(Publication Date)
  • SAGE Publications, Inc

    (Publisher)

  Here, therefore, prog-ress is depicted as not simply a process of formaliza-tion but in terms of the capabilities of populations to engage in both formal and informal work. Informal Economy in Lived Practice The contemporary studies of the Informal Economy reveal that no one school of thought is universally applicable. Instead, different schools apply to differ-ent types of informal work and populations at vary-ing times. When considering the limited number of households pursuing subsistence modes of produc-tion, for example, and how very few households remain untouched by the formal economy, the his-torical residue thesis appears valid. Indeed, this seems to be further reinforced by the evidence from many rural areas, which reveals that the numbers of sub-sistence households are dwindling as the young leave the countryside and move to the towns in search of formal employment. When considering other types of informal work, however, it is the representation of the Informal Economy as a by-product of a new emergent form of capitalism that is using informal working arrange-ments to compete and off-loading onto the informal sector those no longer of valid use to it. Support for this comes not only when examining forms of informal waged employment such as sweatshop-like factory work but also when wider trends are recognized such as that participation in the infor-mal economy is much greater among lower-income populations excluded from the formal economy. Yet to depict all of the Informal Economy in this manner is a misnomer. As the evidence in support of the representation of the Informal Economy as a complement to the formal economy clearly displays, informal work, at least in some of its varieties and in some populations, is often not a sphere inhabited purely by the marginalized but rather is a realm that reinforces, rather than reduces, the sociospatial disparities in the formal economy. This is exemplified in the realm of do-it-yourself activity, for example.

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  Handbook of Urban Studies

  • Ronan Paddison(Author)
  • 2000(Publication Date)
  • SAGE Publications Ltd

    (Publisher)

  In the concluding section, the policy opinions and implications are assessed. Evaluating critically the three dominant policy approaches towards urban informal employment, we conclude that the option chosen is inextricably related to broader prescriptions for work and welfare. Before commencing, however, it is first neces-sary to define what we mean here by urban informal employment. In this chapter, we are discussing the paid production and sale of goods and services that are unregistered by, or hidden from, the state for tax, social security or labour law purposes, but which are legal in all other respects. As such, unpaid informal work is outside the scope of this chapter, as is criminal activity more widely defined. Instead, we are concerned here with activity which is illicit only because it involves social security fraud, tax evasion and/or the avoidance of labour legislation. THE DEVELOPMENT PATH OF URBAN AREAS IN THE ADVANCED ECONOMIES: FORMALIZATION, INFORMALIZATION OR HETEROGENEOUS DEVELOPMENT? The fact that there is a substantial amount of paid work in urban areas of the advanced economies which does not appear in the official statistics is without contention. However, the precise amount of such activity and whether it is increasing or decreasing faster than the measured economic activity is a matter of heated debate. Here, we evaluate critically both the popular belief that there is a formalization of urban economies as well as the theory that they are undergoing a process of informalization. The Theory of Formalization of Urban Economies One of the most widely held beliefs about urban economic development is that as urban economies become more ‘advanced’, there is a natural and inevitable shift of economic activity from the informal to the formal sphere (that is, the theory of formalization). Indeed, this is often the ‘measuring rod’ which defines Third World cities as ‘backward’ and First World cities as supposedly ‘advanced’.

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  The Informal Economy in Developing Nations

  Hidden Engine of Innovation?

  • Erika Kraemer-Mbula, Sacha Wunsch-Vincent(Authors)
  • 2016(Publication Date)
  • Cambridge University Press

    (Publisher)

  Nevertheless, practices continue to be diverse across regions and countries; the ideal consists of data collection through labor force surveys or other household surveys capturing both informal employment and informal sector employment, but this remains rare. Crucially, any satisfactory definition needs to distinguish between the informal sector and the Informal Economy. In this chapter the informal sector is regarded as a component of the Informal Economy: employment in the Informal Economy comprises everyone (whatever their employ- ment status) working in informal enterprises plus everyone working informally in other sectors of the economy, that is, formal enterprises, households with paid employees (domestic workers) or own-account workers producing goods (primary goods or manufactured goods) for the household’s own final use. This definition diverges slightly from the ILO compilations (ILO 2011) in that, although it refers to the Informal Economy, it does not add up the two components of informal sector Informal Economy 19 employment and informal employment outside the informal sector and does not propose an indicator for employment in the Informal Economy. Employment in the Informal Economy, as defined in this chapter, is broader than the concept of informal sector employment. Note, however, that in analyzing innovation and intellectual property specifically, it is the definition of the informal sector and its economic units (including sub- contracted micro-enterprises and outworkers) that should be kept in mind rather than the broader concept of the Informal Economy, as it is in the informal sector that innovation processes take place, not among unprotected workers in formal enterprises. Measuring the contribution of the informal sector and informal employment to GDP also requires an understanding of where these activities and jobs are positioned in the various institutional sectors of the SNA.

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  The Informal Sector in Francophone Africa

  Firm Size, Productivity, and Institutions

  • Nancy Benjamin, Ahmadou Aly Mbaye(Authors)
  • 2012(Publication Date)
  • World Bank

    (Publisher)

  In most cases in West Africa, informal activities, while often undeclared and thus illegal in a narrow sense, are not otherwise criminal in nature. In fact, the informal sector produces ordinary goods and services not much different from those produced by the modern sector. An activity is not deemed informal as a function of its illicit or 16 THE INFORMAL SECTOR IN FRANCOPHONE AFRICA licit nature. Rather, informality is determined according to the type of organi- zation carrying out the activity. Both criminal activities and informal activities are hidden, but not to the same extent, and they clearly are not viewed with the same degree of disapprobation or exposed to the same risk of prosecution. The Organisation for Economic Co-operation and Development (OECD) distinguishes the Informal Economy from the hidden, household, and illegal economies: • The hidden economy includes all activities that are hidden to evade taxation and the payment of other legal obligations. • The illegal economy includes all illicit activities such as drug trafficking and counterfeiting. • The household economy includes activities for personal use, such as paid domestic services. • The Informal Economy includes all activities that are not registered or are registered poorly. In practice, however, these distinctions are rather hazy, to say the least. Per- haps this reflects the OECD’s desire to encompass the realities of both devel- oped and developing countries in a single set of definitions. Overall, the activi- ties in which informal firms engage usually are not illegal in themselves, but the practices of informal firms are often illegal insofar as they involve tax avoidance and lack of compliance with regulations. In West Africa, many formal firms engage in informal activities, so informal- ity is a matter of degree. Many formal firms hide or underreport their revenues and subcontract with informal firms.

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