Formalization, growth and poverty

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The informal sector plays a significant role in developing countries viz. the provision of employment, income and supplying ignored markets. However, working and employment conditions within the sector are still poor. Its expansion and changing structures have thus drawn the attention of scholars and international policy makers to the factors hindering its formalisation. Among the factors addressed are the high costs of formalisation and the lack of incentives for operating in the formal sector. A variety of approaches have been adopted by different stakeholders to overcome these factors. This paper assesses these approaches along with the factors related to informality-formality trade-off and the issue of formalisation as a solution for firms’ growth.

The abstract of Ishengoma & Kappel's Economic Growth and Poverty: Does Formalisation of Informal Enterprises Matter?

Also see McKinsey's Diana Farrel on tackling informality, with comment from CIPE on high informality = economic stagflation.

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