The Idea of a Rural Informal Economy

Abstract

The purpose of this paper is to explore the notion of economic informality and its application in the rural context of developing and transitional economies, applying Keith Hart's (1987) notion of informality as a 'remedial concept'. Some remedy is needed to make sense of the many 'palpable discrepancies' observed between the prescriptions of an economic orthodoxy -- whether of a socialist command economy or a 'marketizing' economy attempting to apply the value chain proposition -- and the 'concrete conditions' of rural life in such economies. The circumstance, that most such economies are only partially 'institutionalized' to whatever economic orthodoxy is being applied in the realm of public policy, throws up the behaviours we recognize as economic informality. In 'marketizing' rural societies the continuing influence of traditional elements, such as household subsistence production, non-market exchange between affines and neighbours, and landholding subject to customary tenure arrangements, may help to explain the phenomenon of partial institutionalization. The tenacity of informality in such economies, and the necessarily slow pace at which small farmer households can be incorporated within formal value chains, should urge us to the more careful study of rural informality and its strengths, to enable these to be harnessed. The advice of Hazell (2011), that it will be necessary 'to make food staples markets work better for small farms', seems a good starting point.

Keywords: informal economy, Keith Hart, rural development, value chain, smallholder agriculture, inclusive business, transitional economies, second economy, North Korea, Cuba

JEL Classification: A12, A14, B20, B24, B31, D13, D73, F63, J43, N50, 010, O13, O17, P25, P51, Q10, Q12, Z10, Z13