Definition of Informal Economy

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Bottom of the Pyramid > Best Practices > Definition of Informal Economy

Definition of Informal Economy
Elwin Poortman, Analyst, Netherlands, Member
People that belong to the bottom part of the economic pyramid are often unable to generate income from the so-called formal economy, and therefore they aim to sustain themselves via informal economic activities. But over the last 50 years, the definition of the "informal economy", has become rather blurred, vague or even empty. To show the difficulty of drafting a one-fits all definition, the most diverse definitions on what characterizes the informal economy, as categorized by Godfrey (2011), have been listed below:
  • The informal economy comprises unofficial economic activities that are conducted by unregistered firms or by registered firms but hidden from taxation (LaPorta & Schleifer).
  • The informal economy is unregulated by the institutions of society, in a legal and social environment in which similar activities are regulated (Castells & Portes).
  • The informal economy activities takes place largely in personal and intimate domains; reflecting the n (...) Read more? Sign up for free

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