This working paper, the first in the WIEGO Working Paper series, provides an overview of the definitional, theoretical, and policy debates on the informal economy. It gives a brief historical overview of the informal sector concept and related debates and then turns to recent rethinking of the concept, detailing the expanded statistical concept of informal employment and holistic conceptual models of the composition and causes of informality. The paper proposes a comprehensive policy response to the informal economy with four main pillars: create more formal jobs; regulate informal enterprises and informal jobs; extend state protections – social and legal – to the informal workforce; and increase the productivity of informal enterprises and the incomes of informal workers. The paper concludes with a call for a fundamental rethinking of the future of the informal economy.
Chen, Martha. "The Informal Economy: Definitions, Theories and Policies." WIEGO Working Paper No. 1, August 2012.