Economy, Informal

Abstract

The informal economy is, broadly speaking, the fraction of the economy not overseen by or not complying with the rules set by the relevant regulatory authority, namely the state. However, the exact definition remains under debate, despite decades of research and academic argument. As Peattie says, “the informal sector is still too broad to be meaningful; at one end is a pool of surplus labor, at the other a skilled high‐income earning entrepreneur; at one end a proliferation of residual enterprises involutionary in nature, at the other end of the spectrum dynamic evolutionary enterprises.” Generally speaking, the size of the informal economy has been linked to issues such as taxes, regulation, and the size of labor supply, among others.