Revue d'études sur les institutions et le développement
Volume 7, Numéro 2, Pages 47-59
2022-06-12
Informality: Causes, Consequences And Formalization Strategies With Views On Mena
Authors : Aysit Tansel .
Abstract
Abstract: This paper reviews the characteristics, causes and consequences of the informal economy and the benefits and costs of formalization. Neoclassical economists maintain that informality is a result of strict labor market regulations. Workers and firms weigh the benefits and costs of complying with regulations and choose to operate informally if the costs exceed the benefits of operating formally. The benefits and costs of formality are discussed from the point of view of workers, firms, governments, the economy and the society. A brief review of literature on Middle East and North Africa (MENA) countries concentrates on the earnings of and the mobility between the formal and informal economies. Informality is more common among men than among women in MENA while opposite is true in most other regions of the world. Finally, the paper reviews the various strategies employed for incentivizing formalization in several developing countries and the efficacy of these strategies.
Keywords
Keywords: Informality; Causes; Consequences; Formalization Strategies; MENA. JEL Codes: J20, J21, J42, J46
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