Informal Markets

Informal markets have often been conceived primarily as a problem in developing countries, while they are also a frequent element of developed economies and global economic exchange. This article analyzes informal markets from an International Political Economy (IPE) perspective, examining two substantially different understandings of informal markets and related research: From the first perspective, analyses focus on how informal markets relate to formal markets, how large the informal market is, and what kind of deviation exists between the formal and informal sector. The second perspective analyzes informal markets against the background of illegal markets and crime. In a first step, the article elaborates on the many varieties and definitions of informal markets. In a second step, the article details explanations for the rise of informal markets. Research typically analyzes the local and national level of informal markets, less so international and transnational linkages, and IPE can contribute to this research substantially. In a third step, the article discusses the methodological challenges linked to assessing the existence and size of informal markets, and the fourth section presents different policies on how informal markets are governed. The concluding section outlines areas for further IPE research on informal markets.