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Informal Economy Topic(s): History & Debates

Keith Hart: Coiner of Term “Informal Sector”

Keith Hart: Coiner of Term “Informal Sector”

Late 1960s Study in Accra, Ghana

History & Debates

Choral Mauladia poses near by her cart in Ahmedabad, India

Photo by Paula Bronstein/Getty Images Reportage

Urban Informal Workers & The Green Economy

The urban poor – the majority of whom work informally – are at significant risk from the increased intensity and frequency of storms, flooding, landslides, heat waves and constraints on fresh water associated with climate change.2 And as a changing climate drives more of the rural poor into cities, the urban working poor face increasing competition.

Informal Economy Debates: Dominant Schools of Thought

Over the years, the debate on the informal economy has crystallized into four dominant schools of thought regarding the causes, composition, and nature of the informal economy, and what should be done about it. There is merit to each of these perspectives, but each school reflects just a “slice of the (informal) pie.” The informal economy as a whole is more heterogeneous and complex than the sum of these perspectives would suggest.

World Bank: A Holistic Framework

In 2007, the Latin America division of the World Bank brought out a publication entitled Informality: Exit and Exclusion co-authored by Guillermo Perry, William F. Maloney, Omar Arias, Pablo Fajnzylber, and Jaime Saavedra. In this publication, the co-authors presented a holistic framework of the composition and causes of informality, as follows:

Ravi Kanbur: A Holistic Framework

In 2009, Ravi Kanbur, Professor of Economics at Cornell University, posited a conceptual framework for distinguishing between four types of economic responses to regulation, as follows:

A. Stay within the ambit of the regulation and comply.
B. Stay within the ambit of the regulation but not comply.
C. Adjust activity to move out of the ambit of the regulation.
D. Outside the ambit of the regulation in the first place, so no need to adjust.