Beyond the Formal Economy: Evaluating the Level of Employment in Informal Sector Enterprises in Global Perspective
Journal of Developmental Entrepreneurship, Vol. 18, No. 4 (2013)
21 Pages Posted: 22 Dec 2015
Date Written: 2013
The aim of this paper is to evaluate the varying level of employment in informal sector enterprises across the globe and to undertake an exploratory analysis of the wider economic and social conditions associated with greater levels of informalization. Examining International Labor Organization surveys conducted in 43 countries, the finding is that the main job of just under one in three (31.5 percent) non-agricultural workers is in an informal sector enterprise. Conducting an exploratory analysis of the correlation between countries with higher levels of employment in informal sector enterprises and economic under-development (‘modernization’ thesis), higher taxes, corruption and state interference (‘neo-liberal’ thesis) and inadequate state intervention to protect workers from poverty (‘structuralist’ thesis), the finding is that there is a need to synthesize various tenets from all three perspectives. The outcome is a tentative call for a ‘neo-modernization’ perspective, which posits that higher levels of employment in informal sector enterprises are associated with economic under-development, public sector corruption and inadequate state intervention to protect workers from poverty.
Keywords: Informal economy, shadow economy, underground sector, entrepreneurship, enterprise development, economic development
JEL Classification: H26, J46, K42, O17
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