Explaining the Informal Economy: An Exploratory Evaluation of Competing Perspectives

Relations Industrielles/Industrial Relations, Vol. 70, No. 4, pp. 741-765, 2015

22 Pages Posted: 10 Jan 2017

See all articles by Colin Williams

Colin Williams

University of Sheffield - School of Management

Date Written: February 10, 2015

Abstract

This paper evaluates critically whether the cross-national variations in the size of the informal economy are the result of: under-development (a modernisation perspective); high taxes, corruption and state interference (neo-liberal perspective), or inadequate state intervention to protect workers (political economy perspective). Analysing 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 over-regulation 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). The implications for theory and policy are then discussed.

Keywords: Informal Sector, Undeclared Work, Employment Relations, Economic Development, Developed Countries

JEL Classification: H26, J46, J48, K34, K42, O17, P37

Suggested Citation

Williams, Colin, Explaining the Informal Economy: An Exploratory Evaluation of Competing Perspectives (February 10, 2015). Relations Industrielles/Industrial Relations, Vol. 70, No. 4, pp. 741-765, 2015, Available at SSRN: https://ssrn.com/abstract=2883467

Colin Williams (Contact Author)

University of Sheffield - School of Management ( email )

15 Conduit Road
Sheffield, S10 1FL
United Kingdom

HOME PAGE: http://https://www.sheffield.ac.uk/management/staff/williams/index

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