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Conceptualising Informality: Regulation and Enforcement

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  • Ravi Kanbur

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Abstract

The informality discourse is large and vibrant, and is expanding rapidly. 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 article 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 thegeneric labels ‘informal’ and ‘formal’, it would be preferable if the analysis focused on thesefour 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, an understanding of its determinants − why and to what extent a government would not enforce a regulation that it 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. [IZA Discussion Paper 4186]

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Bibliographic Info

Paper provided by eSocialSciences in its series Working Papers with number id:2005.

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Date of creation: Jun 2009
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Handle: RePEc:ess:wpaper:id:2005

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Related research

Keywords: informality; regulation; enforcement; informal sector; informal work; wages; minimum wage; labour; Labour Studies;

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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. 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.
  2. 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.
  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. 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.
  5. 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.
  6. Roychowdhury, Punarjit & Dutta, Mousumi, 2011. "Regulation, governance and informality: an empirical analysis of selected countries," MPRA Paper 33775, University Library of Munich, Germany.
  7. Charlot, Olivier & Malherbet, Franck & Ulus, Mustafa, 2013. "Unemployment Compensation and the Allocation of Labor in Developing Countries," GIAM Working Papers 13-3, Galatasaray University Economic Research Center.
  8. Michael Keen, 2012. "Taxation and Development: Again," IMF Working Papers 12/220, International Monetary Fund.
  9. Akay, Alpaslan & Khamis, Melanie, 2011. "The Persistence of Informality: Evidence from Panel Data," IZA Discussion Papers 6163, Institute for the Study of Labor (IZA).
  10. 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.
  11. 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.
  12. Sugata Marjit & Saibal Kar, . "Firm Heterogeneity, Informal Wage and Good Governance," Discussion Papers 11/23, University of Nottingham, GEP.
  13. 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.
  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. 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.

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