The Informal Economy and Poverty: Evidence and Policy Review

Abstract

This review explores the relationship between the informal economy and poverty so as to understand whether the informal economy helps those who are poor to escape their poverty and how to address the informal economy in anti-poverty strategies.

In particular, the report:

• reviews the existing evidence on the size of the informal economy, who participates in and benefits from informal work as well as what type of work they do and why;

• evaluates the range of policy options for dealing with the informal economy;

• identifies best practice policy measures from other advanced economies that enable people in poverty to move from informal into formal work; and

• reveals the need for changes in broader work and welfare systems so as to prevent people in poverty having to turn to the informal economy in order to make ends meet.

Keywords: informal economy; poverty; social exclusion; community development; inequality; poverty alleviation

JEL Classification: H26