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Submitted by Louise Fox on

Megha-

Very nice blog. I agree with your point that "instead of trying to get rid of existing informal clusters, which might be adding economic value in terms of output and employment, the argument is that policy makers ought to consider informal firms as productive actors within the economy." This is a point that we also make in our recently released "Youth Employment in Sub-Saharan Africa" report.

One comment about a key difference between Sub-Saharan Africa (SSA) and India which surfaced in our work. While informal household enterprises in SSA often have supplier relationships with formal firms, they almost always sell to households, not firms. Subcontracted home-based production for larger formal firms simply doesn't exist in SSA but is common in Asia. I suspect that the lack of linkages on the production side has to do with (a) unfriendly urban policies toward this sector in SSA, which inhibits the clustering, and (b) low urban densities and poor transportation networks, which inhibit the development of supplier relationships.
While many express concern about earnings and income security in this sector, the fact is that SSA countries seeking to promote sustainable employment and inclusive growth need to increase the number of enterprises and their productivity, including by encouraging the types of backward linkages found between formal and informal activities found in Asia.