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Title:Rethinking the informal economy: linkages with the formal economy and the formal regulatory environment PDF Logo
Authors:Alter Chen, Martha
Issue Date:2005
Series/Report no.:Research Paper, UNU-WIDER, United Nations University (UNU) 2005/10
Abstract:This paper explores the relationship of the informal economy to the formal economy and to the formal regulatory environment. It begins with a comparison of the earlier concept of the ‘informal sector’ with the new expanded concept of the ‘informal economy’ which includes microentrepreneurs, own account operators, informal wage workers, and industrial outworkers. The central arguments of the paper are that (a) most informal enterprises and workers are intrinsically linked to formal firms; (b) different segments of the informal economy are overregulated, de-regulated, or under-regulated; and (c) there are benefits and costs to both formality and informality. The paper concludes that the appropriate role for government is (i) to ensure that the formal regulatory environment is not biased in favour of formal firms and workers over informal enterprises and workers (or vice versa) and (ii) to regulate the commercial and employment relationships between formal firms, informal enterprises, and informal wage workers.
Subjects:informal sector
Document Type:Working Paper
Appears in Collections:WIDER Research Papers, United Nations University (UNU)

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