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Conceptualizing Informality: Regulation and Enforcement

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  • Kanbur, Ravi

Abstract

The informality discourse is large, vibrant and expanding fast. But there is a certain conceptual incoherence to the literature. New definitions of informality compete with old definitions leading to a plethora of alternative conceptualisations. While some individual studies may apply a tight definition consistently, the literature as a whole is in a mess. This paper proposes that informality and formality should be seen in direct relation to economic activity in the presence of specified regulation(s). Relative to the regulation(s), four conceptual categories that can help frame the analysis are: (A) regulation applicable and compliant, (B) regulation applicable and non-compliant, (C) regulation non-applicable after adjustment of activity and (D) regulation non-applicable to the activity. Rather than use the generic labels informal/formal, it would be preferable if the analysis focused on these four categories (or even more disaggregated as appropriate). A central determining factor in the impacts of regulation on economic activity across these four categories is the nature and intensity of enforcement. While lack of enforcement is well documented, understanding of its determinants—why and to what extent a government would not enforce a regulation that is has itself passed, and why non-enforcement varies from one context to another, is relatively neglected in the literature. Thus specificity on regulation and on enforcement is the key to achieving conceptual clarity in the analytical literature and in the policy discourse on informality.

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Bibliographic Info

Paper provided by Cornell University, Department of Applied Economics and Management in its series Working Papers with number 48926.

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Date of creation: Feb 2009
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Handle: RePEc:ags:cudawp:48926

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Keywords: Food Security and Poverty; Health Economics and Policy; International Development; International Relations/Trade; Political Economy;

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  1. Orley Ashenfelter & Robert Smith, 1977. "Compliance with the Minimum Wage Law," Working Papers 478, Princeton University, Department of Economics, Industrial Relations Section..
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Cited by:
  1. Roychowdhury, Punarjit & Dutta, Mousumi, 2011. "Regulation, governance and informality: an empirical analysis of selected countries," MPRA Paper 33775, University Library of Munich, Germany.
  2. Ghani, Ejaz & Kerr, William R. & O'Connell, Stephen D., 2013. "Female business ownership and informal sector persistence," Policy Research Working Paper Series 6612, The World Bank.
  3. Melanie Khamis, 2012. "A Note On Informality In The Labour Market," Journal of International Development, John Wiley & Sons, Ltd., vol. 24(7), pages 894-908, October.
  4. John Bennett & Matthew Gould & Matthew Rablen, 2012. "Risk attitudes and informal employment in a developing economy," IZA Journal of Labor & Development, Springer, vol. 1(1), pages 1-17, December.
  5. McQuade, Timothy & Salant, Stephen W. & Winfree, Jason, 2010. "Regulating an Experience Good Produced in the Formal Sector of a Developing Country when Consumers Cannot Identify Producers," Discussion Papers dp-10-52-rev, Resources For the Future.
  6. Basu, Arnab K & Chau, Nancy H & Kanbur, Ravi, 2011. "Contractual Dualism, Market Power and Informality," CEPR Discussion Papers 8485, C.E.P.R. Discussion Papers.
  7. Marjit, Sugata, 2009. "Firm Heterogeneity, Informal Wage and Good Governance," MPRA Paper 19168, University Library of Munich, Germany.
  8. Leopoldo Tornarolli & Diego Battistón & Leonardo Gasparini & Pablo Gluzmann, 2014. "Exploring Trends in Labor Informality in Latin America, 1990-2010," CEDLAS, Working Papers 0159, CEDLAS, Universidad Nacional de La Plata.
  9. Ghani, Ejaz & Kerr, William R. & O'Connell, Stephen D., 2013. "The exceptional persistence of India's unorganized sector," Policy Research Working Paper Series 6454, The World Bank.
  10. Michael Keen, 2012. "Taxation and Development: Again," IMF Working Papers 12/220, International Monetary Fund.
  11. Resmi Bhaskaran & Dev Nathan & Nicola Phillips & C. Upendranadh, 2013. "Vulnerable workers and labour standards (non-)compliance in global production networks: home-based child labour in Delhi’s garment sector," Brooks World Poverty Institute Working Paper Series ctg-2013-16, BWPI, The University of Manchester.
  12. Charlot, Olivier & Malherbet, Franck & Ulus, Mustafa, 2013. "Unemployment Compensation and the Allocation of Labor in Developing Countries," IZA Discussion Papers 7233, Institute for the Study of Labor (IZA).
  13. Werner Hernani & Maria Villegas & Ernesto Yanez, 2011. "Unemployment in Bolivia: Risks and Labor Market Policies," Research Department Publications 4758, Inter-American Development Bank, Research Department.
  14. Benjamin, Nancy & Beegle, Kathleen & Recanatini, Francesca & Santini, Massimiliano, 2014. "Informal economy and the World Bank," Policy Research Working Paper Series 6888, The World Bank.
  15. Akay, Alpaslan & Khamis, Melanie, 2011. "The Persistence of Informality: Evidence from Panel Data," IZA Discussion Papers 6163, Institute for the Study of Labor (IZA).

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