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Economic Growth and Poverty: Does Formalisation of Informal Enterprises Matter?

Author

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  • Ishengoma, Esther K.
  • Kappel, Robert

Abstract

The informal sector (IS) plays a significant role in developing countries viz. the provision of employment, income and supplying ignored markets. However, working and employment conditions within the sector are still poor. Its expansion and changing structures have thus drawn the attention of scholars and international policy makers to the factors hindering its formalisation. Among the factors addressed are the high costs of formalisation and the lack of incentives for operating in the formal sector. A variety of approaches have been adopted by different stakeholders to overcome these factors. This paper assesses these approaches along with the factors related to informality-formality trade-off and the issue of formalisation as a solution for firms' growth. By focussing on the problems faced by informal enterprises and the literature which addresses the options for accelerating the formalisation of informal enterprises, the paper will briefly summarise the weaknesses of these approaches.

Suggested Citation

  • Ishengoma, Esther K. & Kappel, Robert, 2006. "Economic Growth and Poverty: Does Formalisation of Informal Enterprises Matter?," GIGA Working Papers 20, GIGA German Institute of Global and Area Studies.
    • Handle: RePEc:zbw:gigawp:20
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    References listed on IDEAS

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    Cited by:

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    2. Beegle,Kathleen G. & Benjamin,Nancy Claire & Recanatini,Francesca & Santini,Massimiliano, 2014. "Informal economy and the World Bank," Policy Research Working Paper Series 6888, The World Bank.
    3. Woldeyohanes, H. T., . "Dimensions and Determinants of Growth in Micro and Small Enterprises: Empirical Evidence from Mekelle City, Ethiopia," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 6(3), pages 1-12.
    4. Nancy Benjamin & Ahmadou Aly Mbaye, 2014. "Informality, Growth, and Development in Africa," WIDER Working Paper Series wp-2014-052, World Institute for Development Economic Research (UNU-WIDER).
    5. Rachel Lock & Helen Lawton Smith, 2015. "The impact of female entrepreneurship on economic growth in Kenya," Working Papers 26, Birkbeck Centre for Innovation Management Research, revised Nov 2015.
    6. Yugank Goyal & Klaus Heine, 2021. "Why do informal markets remain informal: the role of tacit knowledge in an Indian footwear cluster," Journal of Evolutionary Economics, Springer, vol. 31(2), pages 639-659, April.
    7. Kanothi, R.N., 2009. "The dynamics of entrepreneurship in ICT: case of mobile phones downstream services in Kenya," ISS Working Papers - General Series 18727, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    8. José Ventura & Kety Jauregui, 2023. "Poverty Reduction through Corporate Social Responsibility: Case Study of Peruvian Rural Families," Sustainability, MDPI, vol. 15(2), pages 1-20, January.
    9. Tarek, Syed Ali, 2011. "Study of Sustainable Growth Factors of SIE/ Micro-financed Business," MPRA Paper 40752, University Library of Munich, Germany.
    10. Fara Azmat & Ramanie Samaratunge, 2009. "Responsible Entrepreneurship in Developing Countries: Understanding the Realities and Complexities," Journal of Business Ethics, Springer, vol. 90(3), pages 437-452, December.
    11. Kareem Elhennawi, 2016. "Factors Affecting Business Informality Among Egyptian Opportunity Entrepreneurs: An Exploratory Study," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 21(04), pages 1-18, December.
    12. William Ruzek, 2014. "The Informal Economy as a Catalyst for Sustainability," Sustainability, MDPI, vol. 7(1), pages 1-12, December.
    13. Stephen S. Golub & Janet Ceglowski & Ahmadou Aly Mbaye & Varun Prasad, 2018. "Can Africa compete with China in manufacturing? The role of relative unit labour costs," The World Economy, Wiley Blackwell, vol. 41(6), pages 1508-1528, June.

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    Keywords

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    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • D2 - Microeconomics - - Production and Organizations
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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