The Informal Economy: Definitions, Theories and ... - Inclusive Cities
The Informal Economy: Definitions, Theories and ... - Inclusive Cities
The Informal Economy: Definitions, Theories and ... - Inclusive Cities
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WIEGO Working Paper N o 1<br />
Abstract<br />
Today, there is renewed interest in the informal economy worldwide. This is because a large share of the<br />
global workforce <strong>and</strong> economy is informal <strong>and</strong> because the informal economy is growing in many contexts<br />
<strong>and</strong> appearing in new places <strong>and</strong> guises. This working paper, the first in the WIEGO series, provides an<br />
overview of the definitional, theoretical, <strong>and</strong> policy debates on the informal economy. <strong>The</strong> paper opens with<br />
a brief historical overview of the informal sector concept <strong>and</strong> related debates, focusing on the four dominant<br />
schools of thought about the informal economy. It then turns to recent rethinking of the concept, detailing<br />
the exp<strong>and</strong>ed statistical concept of informal employment <strong>and</strong> holistic conceptual models of the composition<br />
<strong>and</strong> causes of informality. <strong>The</strong> paper also examines the linkages between the informal economy,<br />
formal firms, <strong>and</strong> formal regulations <strong>and</strong> the “formalize the informal economy” debate. <strong>The</strong> paper proposes<br />
a comprehensive policy response to the informal economy with four main pillars: create more formal jobs;<br />
regulate informal enterprises <strong>and</strong> informal jobs; extend state protections—social <strong>and</strong> legal—to the informal<br />
workforce; <strong>and</strong> increase the productivity of informal enterprises <strong>and</strong> the incomes of informal workers. <strong>The</strong><br />
paper concludes with a call for a fundamental rethinking of the future of the informal economy.<br />
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