Relations Between Informal & Formal Sector

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Relations Between Informal & Formal Sector
Elwin Poortman, Analyst, Netherlands, Member

Despite the fact that the is debatable, a lot of scholars focus on how an informal sector can be formalised. In particular these scholars research to what extent there are linkages between an informal and formal sector. Proper understanding of the characterstics of possible linkages is vital for organisations and governments that aim to change a specific informal sector, and during the years the debate has seen many different theories towards informal formal sector linkages. These theories can be categorised into three main approaches:
  • DUALISTIC APPROACH: this approach argues that informal sectors supply different markets than formal sectors. Therefore the informal sector acts autonomously and thus has little interaction with formal enterprises or sectors. Moreover, the presence of a large informal economy symbolizes underdevelopment. This approach is characterized by exclusion, inequality and a lack of accessibility.
  • THE LEGALIST APPROACH argues that there (...) Read more? Sign up for free
 

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