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Conceptualizing Informality: Regulation and Enforcement

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  • Kanbur, Ravi

Abstract

The informality discourse is large, vibrant and expanding fast. 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 paper 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/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, understanding of its determinants—why and to what extent a government would not enforce a regulation that is 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.

Suggested Citation

  • Kanbur, Ravi, 2009. "Conceptualizing Informality: Regulation and Enforcement," Working Papers 48926, Cornell University, Department of Applied Economics and Management.
  • Handle: RePEc:ags:cudawp:48926
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    References listed on IDEAS

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    1. Yaniv, Gideon, 2001. "Minimum Wage Noncompliance and the Employment Decision," Journal of Labor Economics, University of Chicago Press, vol. 19(3), pages 596-603, July.
    2. Ashenfelter, Orley & Smith, Robert S, 1979. "Compliance with the Minimum Wage Law," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 333-350, April.
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    More about this item

    Keywords

    Food Security and Poverty; Health Economics and Policy; International Development; International Relations/Trade; Political Economy;

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J88 - Labor and Demographic Economics - - Labor Standards - - - Public Policy
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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