THE ROLE OF THE INFORMAL SECTOR IN ECONOMIC GROWTH AND DEVELOPMENT IN AFRICA (original) (raw)
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From the “Margins” to the “Engine of Growth” “Conceptualisation of the Informal Sector in Egypt”
Informality has been a challenge for Egypt for some decade with the informal employment growing at a faster rate than the formal one and it accounts for about 40% of the total labour in 2012. Data series on new entrants to the labour markets (18+) show that in 1969 around 20% were disproportionately drawn into informal sector, increased to 70% in 1998. Recent data in 2014 suggest that this trend remains true. The negative impacts of informality are not restricted to individuals, households or institutions that are working in the informal sector but on the economy as a whole. Many attempts are trying to deal with informality for different purposes, some attempt to integrate informal sector into formal one, others see the economic unites or individuals belong to the informal sector as potential tax payers. Others are seeking to find decent work in the informal sector. Formalising the informal sector, encouraging people to join the formal sector, or recommending mandatory legislative, executive and judicial reforms aiming at depriving individual from joining the informal sector requires conceptualizing the informal sector and identifies the framework in which it operates and examining factors that influence people’s choices in entering labour markets, where the current paper is trying to uncover. The paper provides a discussion on the informal sector conceptualisation through range of literature on the Less Developed Countries with the main focus on Egypt. The discussion covers the terms and definitions used, the framework in which the informal sector theoretically operates, the determinants and factors that assumed or explored to affect the informal sector whether the starting point or its growth. The main result is that a universal definition of the informal sector cannot hold true for every single country context. In addition, instead of defining the informal sector unites a shift occurred toward defining the informal labour market workers. The criteria suggested to identify the informal sector workers include non-registration ofthe workplace, lack of contract, lack of social insurance and lack of health insurance. The conceptualisation and the framework in which the informal sector operates have changed over time. From the tripartite division of activity that failed to represent the heterogeneity of activities found under each subsystem, to the sectorist school that view the informal and the formal parts of the economy as two sectors operating under one economic system characterised by either a complementarity or competitiveness relationship. Informal sector within the Arab countries is assumed to be operating within the sectorist view. A shift of discourse on notion of the informal sector in Egypt is a substantial change, from the notion “margins” of the “modern” economy to the “engine of growth” of the economy. Till the end of the 1960s, the informal sector (margins population) was a problematic segment. After 1960’s, this problematic segment became a solution to the economic crisis just by redefining it to the “engine of growth” and suggesting that it can play an important role in addressing employment crisis. It seems that the determinants or factors that affect the growth of the informal sector differ between Developed and Developing Countries, while there are common factors between the two groups that affect its growth. The failure of the modern economy in the Developed Countries to provide sufficient jobs for the growing number of job seekers could be the starting point of the informal sector, while the sudden penetration of capitalism associated with twentieth-century techniques may have created the initiatives of the informal sector in the Developing Countries. On the other hand, informal sector growth in Developed and Developing Countries is affected by same factors: regulations and legislation, economic recession, and macro-economic policies. On the micro level factor, poverty, education, and skill level, along with the lack of jobs in the formal sector, are those factors that influence the growth of the informal sector.
Informality has always been a challenge for Egypt as a developing country. The informal employment has jumped from 30.7 per cent in 1998 to 40 per cent in 2012. The main reasons behind the increasing informality are varied, numerous and different. Moreover, the negative impacts of informality are not only confined to the individuals, households or companies that are working in the informal sector but on the economy of Egypt as a whole. Hence, an integratedregulatory approach must be adopted to rescue Egypt’s economy and get it out of the unforeseen future.
2002
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Informality, Growth and Development in Africa
Oxford Handbooks Online, 2014
The informal sector makes up an overwhelming share of both gross domestic product and total employment in Africa. In this paper, we lay out some of the basic characteristics of the informal sector in sub-Saharan Africa, relevant institutions, and development issues. Proposed policy approaches recognize both that the great capacity of the informal sector is not easily harnessed into formal systems, and that development is problematic when the bulk of economic activity operates outside of the formal regulatory regime.
The informal Economy Worldwide: Trends and Characteristics
It has now been more than 40 years since the fi rst attempts of defi ning and data collection on informal sector and informal employment on a large scale were launched in the early 1970s. Many debates paved the way for the international defi nition of the informal sector in 1993 and informal employment in 2003. The informal economy is fi nally a means for conciliating the two concepts and since the mid-1970s, national estimates of size (employment)
Growth with Development: Informal Sector and Human Development in Low-income Sub-Saharan Economies
The low-income economies in Sub-Saharan Africa (SSA) present a segmented economic structure. In this paper we state that, in these economies, informal activities can contribute largely to poverty reduction and to economic and human development. The development process is analysed starting from the assumption that its evolution is influenced by institutional endowments and non-institutional resources endowments. In the first part of the paper the definition and the role of the informal sector are presented. Afterwards, in order to present a stylised structure of the SSA low-income economies the paper focuses on the informal sector and on the main characteristics of these economies. In the second part of the paper a model derived by the stylised representation is exposed. In this model the economic development is influenced by the presence of institutional and non-institutional resource endowments. In the last part of the paper relevant policy implications are outlined in the direction of a broad based development supporting micro, small and medium enterprises development. The main conclusions are reported.
The Theoretical Analyisi of Informal Economy and Informality in Developing Countries
2011
This paper evaluates critically the contrasting theorizations on informal economy. These include modernization, dependency, and Neo-liberalism and Structuralisms theories. These theories were examined against African informal economy by examining the issues of differentiation of informal economy, women in informal economy, subcontracting and supply linkages with the formal sectors and the role of state in the informal economy expansion. This paper argues that, given the structural and historical differences on emergence of informality between developed, Latin American and developing countries, caution needs to taken in applying these theories that heavily developed from Latin American experiences to African informal economy. In these theories, little consideration was given to the historical circumstances in which informal activities emerged in African countries. The paper concludes that informal economy in developing countries should be analyzed as social and historical processes rather than a sector that emerges as a result of crisis. What is needed is a theoretical framework that analyses the origin, causes and persistence of informality in African societies.
Crisis, Informalization and the Urban Informal Sector in Sub-Saharan Africa
Development and Change, 1995
Neo-liberal theories of informality have emphasized the potential of the informal sector for independent employment creation and growth. An alternative perspective is provided by the structuralist 'informalization' approach which regards the expansion of informal activity as part of the restructuring strategy of the formal sector in the face of economic recession. The informalization perspective challenges the traditional notions of the informal sector by focusing on such issues as differentiation, social networks, subcontracting and supply linkages with the formal sector, and the role of the state in informal sector expansion. Despite its First World and Latin American focus, the informalization approach offers important insights for the study of urban informal sectors in Africa.