Beyond the Formal/Informal Economy Binary Hierarchy

Abstract

Purpose – This paper aims to evaluate critically the conventional binary hierarchical representation of the formal/informal economy dualism which reads informal employment as a residual and marginal sphere that has largely negative consequences for economic development and needs to be deterred.

Design/methodology/approach – To contest this depiction, the results of 600 household interviews conducted in Ukraine during 2005/2006 on the extent and nature of their informal employment are reported.

Findings – Informal employment is revealed to be an extensively used form of work and, through a richer and more textured understanding of the multiple roles that different forms of informal employment play, a form of work that positively contributes to economic and social development, acting both as an important seedbed for enterprise creation and development and as a primary vehicle through which community self-help is delivered in contemporary Ukraine.

Research limitations/implications – This survey reveals that depicting informal employment as a hindrance to development and deterring engagement in this sphere results in state authorities destroying the entrepreneurial endeavour and active citizenship that other public policies are seeking to nurture. The paper concludes by addressing how this public policy paradox might start to be resolved.

Originality/value – This paper is one of the first to document the role of informal employment in nurturing enterprise creation and development as well as community exchange.

Keywords: informal economy, informal sector, economic development, binary hierarchy, dualism, future of work

JEL Classification: H26, J46, J48, K34, K42, O17, P2, P3