Re-thinking the Approach to Informal Businesses : Typologies, Evidence and Future Exploration
Interventions over the past decades to encourage increased business formalization have shown mixed results and produced limited knowledge on how to address informality systematically. The scale of the informal sector in emerging and developing econ...
| Main Authors: | , , , |
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| Format: | Report |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/642101607539592355/Re-thinking-the-Approach-to-Informal-Businesses-Typologies-Evidence-and-Future-Exploration http://hdl.handle.net/10986/34926 |
| Summary: | Interventions over the past decades to
encourage increased business formalization have shown mixed
results and produced limited knowledge on how to address
informality systematically. The scale of the informal sector
in emerging and developing economies, which accounts for 25
to 40 percent of GDP and often more than 60 percent of
employment, merits rethinking approaches to formalization.
Based on a review of relevant literature on informality and
efforts to promote formalization, this paper will discuss
the use of the term “informality” to align with the
heterogeneity that exists within the informal sector and to
identify factors that drive formality. From there, the paper
proposes four specific areas for additional research and
pilot interventions: (1) supporting informal clusters; (2)
providing support to informal businesses without
formalization as a target; (3) developing simplified,
intermediate, and temporary legal statuses for informal
businesses to better align with business needs and
government goals; and (4) understanding behavioral insights
that influence businesses’ decisions to remain informal and
that can contribute to effective policy making. Throughout
this discussion, the authors aim to motivate development and
testing of new approaches to informality based on a deepened
understanding of the needs of informal businesses. |
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