What is it about?

This paper evaluates critically whether the cross-national variations in the size of the informal economy are the result of: under-development (a modernization perspective); high taxes, corruption and state interference (neo-liberal perspective); or inadequate state intervention to protect workers (political economy perspective).

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Why is it important?

Analyzing the varying size of the informal economy across 33 developed and transition economies, elements of all three perspectives are found to be valid with larger informal economies associated with under-development, public sector corruption and overregulation in some spheres (e.g., temporary employment and temporary work agencies) but too little intervention in others (e.g., social protection, labour market interventions to protect vulnerable groups).

Perspectives

This paper reveals that greater state intervention to protect vulnerable workers is required if the informal economy is to be tackled.

Professor Colin C Williams
University of Sheffield

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This page is a summary of: Explaining the Informal Economy: an Exploratory Evaluation of Competing Perspectives, Relations industrielles, January 2015, Consortium Erudit, DOI: 10.7202/1034902ar.
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