Beyond formality and informality

Basudeb Guha-Khasnobis, Ravi Kanbur and Elinor Ostrom

in Linking the Formal and Informal Economy

Published in print September 2006 | ISBN: 9780199204762
Published online September 2006 | e-ISBN: 9780191603860 | DOI:

Series: WIDER Studies in Development Economics

 Beyond formality and informality

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The usefulness of the formal-informal dichotomy has constantly been debated in the field of economics, leading to a reconsideration of the conceptual and empirical basis of the formal-informal divide, and the assessment of its policy implications. It is argued that the tendency to associate ‘informal’ with ‘unstructured’ and ‘chaotic’ must end. Such an association is conceptually unsound and has led to policy disasters as the state sought to provide ‘structures’ where none was presumed to exist before. Instead, the terminology of informal-formal can be used to characterize a continuum of the reach of official intervention in different economic activities, especially since official statistics already use variants of such a criterion. However, it is emphasized that ‘more’ or ‘less’ reach is not necessarily ‘better’ or ‘worse’.

Keywords: dichotomy; policy; structure; development; continuum

Chapter.  7352 words. 

Subjects: Economic Development and Growth

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