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Conceptualising Informality: Regulation and Enforcement

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  • Kanbur, Ravi

    ()
    (Cornell University)

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 the generic labels 'informal' and '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, 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.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4186.

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Length: 18 pages
Date of creation: May 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4186

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Keywords: informality; regulation; enforcement;

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References

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  1. Ashenfelter, Orley & Smith, Robert S, 1979. "Compliance with the Minimum Wage Law," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(2), pages 333-50, April.
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Cited by:
  1. Sugata Marjit & Saibal Kar, . "Firm Heterogeneity, Informal Wage and Good Governance," Discussion Papers 11/23, University of Nottingham, GEP.
  2. 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, Resources For the Future dp-10-52-rev, Resources For the Future.
  3. Leopoldo Tornarolli & Diego Battistón & Leonardo Gasparini & Pablo Gluzmann, 2014. "Exploring Trends in Labor Informality in Latin America, 1990-2010," CEDLAS, Working Papers, CEDLAS, Universidad Nacional de La Plata 0159, CEDLAS, Universidad Nacional de La Plata.
  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. 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. 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.
  7. Akay, Alpaslan & Khamis, Melanie, 2011. "The Persistence of Informality: Evidence from Panel Data," IZA Discussion Papers 6163, Institute for the Study of Labor (IZA).
  8. Michael Keen, 2012. "Taxation and Development: Again," IMF Working Papers 12/220, International Monetary Fund.
  9. Roychowdhury, Punarjit & Dutta, Mousumi, 2011. "Regulation, governance and informality: an empirical analysis of selected countries," MPRA Paper 33775, University Library of Munich, Germany.
  10. 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).
  11. Benjamin, Nancy & Beegle, Kathleen & Recanatini, Francesca & Santini, Massimiliano, 2014. "Informal economy and the World Bank," Policy Research Working Paper Series 6888, The World Bank.
  12. 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.
  13. 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.
  14. Basu, Arnab K. & Chau, Nancy & Kanbur, Ravi, 2011. "Contractual Dualism, Market Power and Informality," IZA Discussion Papers 5845, Institute for the Study of Labor (IZA).
  15. 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.

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