Informal Sector or Informal Economy?

by Daniel Hawkins
The term 'informal sector' (IS) has been one of the most hotly debated socio-economic concepts of the past 40 years. Etymologically, one can only define it with respect to the formal sector as it derives from and is intrinsically defined by its comparison to this term. Taking this cue, the IS can be understood as all income-generating economic activities not authorized or regulated by the State in social contexts where other similar activities are monitored and authorized (Castells & Portes, 1989: 12). Widening this definition to encompass socio-cultural aspects, one can perceive the IS as contravening State regulations but not social moral codes (De Soto, 1994). The character of what is informal or formal is always defined in the ever-fluxing relationship between the State and civil society. The IS must also be differentiated from the illegal economy. While the first term entails the production, distribution and sale of goods that are socially perceived and normatively defined as licit, the second involves goods that are deemed illicit.  [Read more] ...