RETHINKING THE CHANGING STRUCTURE OF THE INFORMAL SECTOR IN THE DILEMMA OF NECESSITY AND OPPORTUNITY

Abstract

The first studies on the informal sector and the informal economy entered the academic research agenda in the early 1950s with the proliferation of small-scale and low-productivity enterprises in developing countries. In those years, the informal sector was characterized as a temporary and marginal economic activity reflecting a lack of modernization. Since then, informalization has evolved to encompass a wider range of phenomena at the level of the economy, employment and institutions. Since the 1970s, under the influence of neoliberalism and globalization, it has become a fundamental feature of the economies of many developing countries. In 1993, the International Labour Organization (ILO) defined the informal sector, and in 2003, informal employment, and the boundaries between informal activities and the illegal or underground economy were clearly demarcated. Today, the informal sector has become a globally pervasive phenomenon, accounting for about 60 percent of the employed population worldwide and about one-third of economic activity in low- and middle-income countries. This paper aims to provide an overview of the development of the informal sector concept, measurement challenges, main drivers, policy implications and its relationship with the formal sector. In this context, general approaches to the informal economy will be presented and definitions of the informal sector since the 1950s will be analyzed from a retrospective perspective.