Chapter

The relevance of the concepts of formality and informality: a theoretical appraisal

Alice Sindzingre

in Linking the Formal and Informal Economy

Published in print September 2006 | ISBN: 9780199204762
Published online September 2006 | e-ISBN: 9780191603860 | DOI: http://dx.doi.org/10.1093/0199204764.003.0004

Series: WIDER Studies in Development Economics

 The relevance of the concepts of formality and informality: a theoretical appraisal

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The concept of informality has encompassed an increasing number of meanings; referred to highly heterogeneous phenomena and measurement methods; and has been explored by development microeconomics (informal contracts) and institutional economics (informal institutions). This plurality of meanings and instruments calls into question the concept’s validity. This paper synthesizes the critical issues within both a development economics and an institutional economics perspective. First to be examined are the conceptual problems inherent in the concept of informality, especially its inconsistencies and the heterogeneity of the phenomena and measurement. The concept is then analysed according to an institutionalist perspective. A more relevant distinction than the formal-informal one is proposed, which relies on an alternative theory of institutions and different distinctions, particularly between the forms, contents, and meanings of institutions.

Keywords: informality; institutions; social norms; development; institutional economics

Chapter.  6232 words. 

Subjects: Economic Development and Growth

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