Why and how should the informal economy be revisited after 50 years?

Abstract

Much has been written about the informal economy since the early times, when the concept was coined at the turn of the 1970s, and several revisiting exercises have been conducted since then, in particular by the OECD, in 1990 (Turnham, Salomé & Schwarz, 1990) and in 2009 (Jütting & de Laiglesia, 2009). So why would it be necessary to revisit once more an abundant literature? Several reasons make the case for such an exercise. A first reason is that, despite the progress and the expansion of internationally agreed definitions, the confusion between the informal economy and the illegal economy is still widespread, and the concept of the informal economy is often used as a synonym for the shadow economy. It is therefore important to clarify the terms used in debates and to understand why the concept of the shadow economy as coined for describing the situation of developed economies eventually spread to the rest of the world. Furthermore, far from being confined to economic approaches, informality needs to be addressed, surveyed and understood from the points of view of other social sciences as well as of activists involved in the support of vulnerable populations who are dependent on the informal economy today. A second reason to revisit is that it has been proposed that informality is the new normal, given the magnitude and trends of the informal economy within total employment and to a lesser extent in Gross Domestic Product (GDP). What does this say about economic development, contemporary capitalisms and contemporary societies, as well as about the social contracts that bind citizens to the states and the variety of their modes of government? A third reason is that the boundaries of informality are shifting, not only because some previously illegal activities can become legal or tolerated – and, in any event, provide income (prostitution, for example) –, but also because the notion of work and employment is progressively changing, returning to the origins, when the provision of services for own consumption by households was considered as work. The initial concept of the informal economy, confined to production for the market, has been