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The Informal Sector

Urban Informal Sector: Definitions at a glance

The urban informal sector, often called the urban subsistence sector/unorganized sector/unenumerated sector, is conceptually defined to include all economic activities which are not officially regulated and which operates outside the incentive system offered by the state and its institutions. In contrast, enterprises which enjoy official recognition, protection and support are defined as formal sector enterprises.

At the empirical level, the informal sector often is defined to comprise these economic enterprises which employ less than certain number of persons (e.g. 5 or 10, depending on the country's official procedures) per unit, and which simultaneously satisfy one or more of the following criteria: (a) it operates in open spaces, (b) it is housed in a temporary or semipermanent structure, (c) it does not operate from spaces assigned by the government, municipality or private organizers of officially recognized market-places, (d) it operates from residences or backyards, and (e) it is not registered.

The three facets of the informal sector are:

PEOPLE Labour force: analysis is mode from labour market perspective (job search model, labour segmentation etc.)

ACTIVITY Economic enterprise/business/firms: analysis is mode from the industrial organization perspective (market structure, market conduct, and market performance)

HABITAT Information settlements (squatters and slums): culture of poverty thesis and similar sociological aspects used to dominate analysis; current trend is to use housing problems


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