Relations Between Informal & Formal Sector




Bottom of the Pyramid
Knowledge Center

Translate

Forum
2
Elwin Poortman
Analyst, Netherlands

Relations Between Informal & Formal Sector

Despite the fact that the definition of the informal economy 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 are strong linkages between informal and formal sectors; this relation is an incentive of the formal sector. Cost-effective behaviour exploits opportunities that lower production or transactions costs. This approach has an emphasis on the captive and exploitative relation between formal and informal industries, which implies that the linkages are characterized by an unequal power relation in which the formal sector reigns over the informal sector.
  • THE STRUCTURALIST APPROACH also argues that there are linkages between informal and formal industries. This approach reasons that the informal sector is a part of the continuum within the market, meaning that, in principle, there is no exclusion. Therefore this approach underlines a level of interdependency and complementarity, moreover it ranks the informal sector as a feature of the modern capitalist mode of production. This view suggests that the power relation between both sectors is rather equal and flows both ways.
⇒ To what extent do you think that informal markets should be formalised?

Source: Carr & Chen (2001). Globalization and the Informal Economy: How Global Trade and Investment Impact the Working Poor. WIEGO p.129.

   

More on Bottom of the Pyramid:
Summary
DIscussion Topics
Are the Bottom of the Pyramid (BOP) Brand Conscious Consumers?
Fighthing Corruption in Developing Countries. The Role of Leaders
The Role of Government in Bottom of the Pyramid Thinking
Increase the Whole Pyramid
A Bottom of the Pyramid Solution Must Be High Tech, Low Cost and Mass Producible
Bottom of the Pyramid and Technology
Bottom of the Pyramid Concept by CK Prahalad is Profound
Bottom of the Pyramid People and SMEs
The BOO Model, BOOM Model and BOOT Model. Implementation in BOP Countries
What is Jugaad? Meaning, Definitions and Examples
Packaging at the Bottom of the Pyramid
Using House of Quality With Bottom of the Pyramid Framework
Developing and Exporting Ideas From BOP Countries
Lighting Up African Village Schools
Definition of Informal Economy
Enabling Bottom of the Pyramid (BOP) Entrepreneurs
Problems with Bottom of Pyramid
Responsibility of International Corporations
Rural Marketing - Rural (Tourism) Marketing
Why Informal Economies can Become Larger than Illegal Economies
Bottom of Pyramid and Network Marketing Hybrid Plan
🔥Effective Humanitairian Aid to BOP Countries: The Case of Haiti
Improving the Lot of People at Bottom of the Pyramid (BOP) Takes More
👀Relations Between Informal & Formal Sector
Best Practices in Extending Medical Facilities to the Poor
Community Marketing in Developing Countries
Differences in Purchasing Decision Making and Consumer Behavior in BOP-markets
Ideas for Development Phase of Papua New Guinea
Bottom of Pyramid People?
Bottom of the Pyramid (BOP) and Communication
Special Interest Group

Do you know a lot about Bottom of the Pyramid? Become our SIG Leader

Bottom of the Pyramid
Knowledge Center



About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
2023 12manage - The Executive Fast Track. V16.0 - Last updated: 29-1-2023. All names of their owners.