Measuring innovation in the informal economy: current knowledge and open issues

The informal economy is a global and pervasive phenomenon. It provides a significant source of employment and livelihoods, especially for the most vulnerable and marginalised people in society. Despite the usual characterisation of the informal economy as a residual component of the economy, in many developing countries the informal economy is, in fact, the main economy. Informal economic activities are typically described as rudimentary, with little attention to their innovative potential. Research on innovation in the informal economy still represents a relatively new and unexplored frontier, and discussions around measuring it are still in their infancy. One of the difficulties with measuring innovation in the informal economy has to do with defining the boundaries of the informal economy itself. Others have to do with the practicalities of implementing different data collection methods in informal settings. This chapter reviews what we know about measuring innovation in the informal economy, highlighting key issues that remain open or unresolved in order to support the advance of studies in this field of research.