Informal Economy: Grounded

Theories
Reference:
Swanson, L., Bruni – Bossio, V. (2018). A Righteous
Undocumented Economy. Retrieved from
https://link.springer.com/article/10.1007/s10551-018-3878-2

PMD 307 – International Labor Laws

Dr. Delia Ayano
Professor

Illeyt R. Silva
PhD Student
Informal Economy: Its Concept
Refer to economies where activities involved are
deemed non compliant

A system based on despicable reasons

But,
Informality is a multidimensional continuum (De
Castro et al, 2014)
Grounded Theories
Keith Hart (1973) coined the term Informal Economy where he
explained that;
Informal Economies where those who had been unsuccessful
at earning adequate incomes in the formal system

Community based
participatory action presented notions on;

1. Unavailability of information (when associated with the

formal economy)
2. Absence of documentation results occasional earnings
Legitimacy Theory (Suchman, 1995)

Informal activities are considered legitimate

because it becomes an accepted norm and
practice

The International Labor Organization (ILO)

describes the informal economy as activities
considered illegal but has legal objectives.
 Plight of Labor in Informal Economies
What concerns government about this frugal
Innovation?

- Potential negative impact on competitiveness and

growth
- Incomplete coverage of formal social programs
- Undermining social cohesion and law and order
- Fiscal losses
Implications…
Informal economy as “grey” “shadow” resorts to
employing people under conditions of labor
malpractices that does not conform with the
laws;
- Basic and competitive pay
- Access to social service and security of tenure
- Occupational and safety regulations