What is it about?

This article evaluates critically the neoliberal perspective that employment in the informal economy is a product of high taxes, public sector corruption and state interference in the free market and that reducing taxes, corruption and the regulatory burden via minimal state intervention is the remedy.

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Why is it important?

Analysing the varying size of the informal economy across 36 developing and transition countries, little or no association is found with higher tax rates, greater levels of corruption and state interference. Instead, employment in the informal economy appears to reduce with higher levels of regulation and state intervention. The theoretical and policy implications are discussed.

Perspectives

This paper critiques the popular view that the informal economy exists due to high taxes and burdensome regulations, and that the way forward is therefore de-regulation and lowering taxes

Professor Colin C Williams
University of Sheffield

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This page is a summary of: Tackling employment in the informal economy: A critical evaluation of the neoliberal policy approach, Economic and Industrial Democracy, February 2017, SAGE Publications, DOI: 10.1177/0143831x14557961.
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