Why Informal Economies can Become Larger than Illegal Economies

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Why Informal Economies can Become Larger than Illegal Economies
Elwin Poortman, Analyst, Netherlands, Premium Member
Over the last decades, the concept "informal economy" has been conceptualized in many ways (see here for detailed info); scholars often refer to it as economic activities that take place outside a defined legal framework. This easily makes one assume that informal behavior is synonymous to illegal behavior.

Webb, Tihanyi, Ireland, & Sirmon (2008) do not agree with this reasoning and distinguish a difference between informality and illegality. In order to prove this, they refer to the concept of LEGITIMACY, best defined as: “a generalized perception or assumption that the action of an entity are desirable, proper or appropriate within some socially constructed system of norms, values, beliefs and definitions”.

This construct legitimacy is centered around public acceptance. The authors underline that formality and informality are affected by the concept of legitimacy. They argue that society'...Sign up


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