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Integrating the Informal Sector into the Formal Economy: Some Policy Implications

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This study presents a survey of studies on informal sector with special emphasis on country experiences on integration of informal economic activities. Informal sector is a controversial topic since for many scholars, informal economic activities distort economy while according to others, it may contribute to economic growth. Yet, there is a growing consensus on the necessity to promote the informal sector on account of its importance with respect to employment and poverty issues alike. The previous experiences on integrating informal sector into the formal economy show that formalization schemes are not guaranteed from the viewpoint of the organized sectors, but rather by the benefits that access to formality may bring in fostering the development of informal activities and the relevant parties. Yet, oversight campaigns targeting informal activities are often overrated by the need to widen the tax base, cut down on tax evasion and punish illegality. In the Turkish economy context, the low levels of tax revenues despite high tax rates suggest that Turkish economy is on the right side of the Laffer curve. Therefore policymakers should seek ways to extend the tax base.

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Article provided by Sosyoekonomi Society in its journal Sosyoekonomi Journal.

Volume (Year): (2006)
Issue (Month): 2006-1 ()

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Handle: RePEc:sos:sosjrn:060105
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  1. Fethi Ogunc & Gokhan Yilmaz, 2000. "Estimating The Underground Economy In Turkey," Discussion Papers 0004, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  2. Alan Reynolds, 1985. "Some International Comparisons of Supply-Side Tax Policy," Cato Journal, Cato Journal, Cato Institute, vol. 5(2), pages 543-569, Fall.
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