Reversing the tide of rising informality

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Informality_1 Curbing the growth of informality is a principal goal of business environment reformers.

By some estimates more than 30 percent of the developing world’s GDP and 70 percent of its workers are outside the official economy. The implications: Most small firms are trapped in low-productivity operations with little access to finance, key government services, and formal customers. Workers lack safety and social protection. And bigger, better-connected firms use “unfair” informal practices to beat out more productive formal competitors. The result is slower economic growth and a growing social divide between the informal and formal parts of society.

But what to do? These FIAS writers suggest major simplification of labor, land and tax regulations along with drastic improvement of public sector governance. No small feat.

For more, see this online discussion: introduction and comments.

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