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Avoiding Informality Traps

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  • Kanbur, Ravi

Abstract

Despite historically high rates of economic growth in South Asia over the last two decades, the extent of informality remains large and widespread. This paper asks why that is, why informality needs to be addressed, and how it can be addressed. The central thrust of this paper is to emphasize the heterogeneity of the informality discourse. While informality has a core commonality of concern in analysis and policy, there are diverse conceptualizations, diverse empirical measurements, diverse causal channels and theories of informality, and diverse policy concerns. For policy, the single most important conclusion is that there is no single overarching policy intervention to address the concerns that arise with informality, and that a range of interventions need to be examined and implemented. These include: policies that induce fast growth whose sectoral patterns make it highly labor absorbing; extending coverage of state protections to informal workers while reviewing existing regulations to enhance their flexibility and implementation; direct measures to increase the productivity and incomes of enterprises in the informal sector, which includes targeted measures of training and enterprise support as well as general measures of bringing legal and other state infrastructure support to these enterprises; better enforcement of regulations that do exist, and assessing enforcement possibilities before regulations are passed.

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  • Kanbur, Ravi, 2011. "Avoiding Informality Traps," Working Papers 126536, Cornell University, Department of Applied Economics and Management.
  • Handle: RePEc:ags:cudawp:126536
    DOI: 10.22004/ag.econ.126536
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    References listed on IDEAS

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    1. Fields, Gary S., 1975. "Rural-urban migration, urban unemployment and underemployment, and job-search activity in LDCs," Journal of Development Economics, Elsevier, vol. 2(2), pages 165-187, June.
    2. Long, Cheryl & Zhang, Xiaobo, 2011. "Cluster-based industrialization in China: Financing and performance," Journal of International Economics, Elsevier, vol. 84(1), pages 112-123, May.
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    Cited by:

    1. Kathuria, Vinish & Rajesh Raj, S.N. & Sen, Kunal, 2013. "The effects of economic reforms on manufacturing dualism: Evidence from India," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1240-1262.
    2. Pager Sean A., 2017. "The Role of Copyright in Creative Industry Development," The Law and Development Review, De Gruyter, vol. 10(2), pages 521-576, October.
    3. Rajesh SN Raj & Kunal Sen, 2016. "Moving out of the bottom of the economy? Constraints to firm transition in the Indian informal manufacturing sector," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-20, December.
    4. Anuradha Joshi & Wilson Prichard & Christopher Heady, 2014. "Taxing the Informal Economy: The Current State of Knowledge and Agendas for Future Research," Journal of Development Studies, Taylor & Francis Journals, vol. 50(10), pages 1325-1347, November.
    5. Rajesh S. N. Raj & Kunal Sen, 2015. "Finance Constraints and Firm Transition in the Informal Sector: Evidence from Indian Manufacturing," Oxford Development Studies, Taylor & Francis Journals, vol. 43(1), pages 123-143, March.
    6. Golam Rabbani & S N Rajesh Raj, 2024. "The role of financial constraints in firm transition—Evidence from Indian manufacturing," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(4), pages 2193-2228, May.
    7. Altay Mussurov & G Arabsheibani, 2015. "Informal self-employment in Kazakhstan," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-19, December.
    8. Haroon Bhorat & Kezia Lilenstein & Morne Oosthuizen & Amy Thornton, 2016. "Vulnerability In Employment: Evidence from South Africa," Working Papers 201604, University of Cape Town, Development Policy Research Unit.
    9. repec:idq:ictduk:13663 is not listed on IDEAS
    10. Aalia Cassim & Kezia Lilenstein & Morne Oosthuizen & Francois Steenkamp, 2016. "Informality and Inclusive Growth in Sub-Saharan Africa," Working Papers 201602, University of Cape Town, Development Policy Research Unit.
    11. Anushree Sinha & Ravi Kanbur, 2012. "Introduction: Informality—Concepts, Facts and Models," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 6(2), pages 91-102, May.

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