ECON2013 Development Economics The informal sector © Peter Smith, March This work is licensed under a Creative Commons licenceCreative Commons

Characteristics of the informal sector Entry barriers Resources Ownership Scale of operation Technology/intensity Skills Market (customers/suppliers) Security of tenure Wages/income

The role of the informal sector Provides employment and income Generates surplus Mobilises savings from people otherwise excluded from credit markets Provides training for workers Produces traditional crafts (?foreign exchange) Provides cheap services & products

But… No protection/security Aggravates R-U migration & urban unemployment (lower op cost) Environmental consequences of urban crowding Poor health conditions Child labour Loss of tax revenue

A final issue for discussion Should the informal sector be suppressed on the grounds that it adds to urban congestion & pollution? Should it be promoted because it reduces provides a transition to formal sector employment? Should it be regulated & drawn into the formal sector?