Concept of the Informal Economy to Labour Market Changes in Developed Countries: What Can Be Learned

This working paper examines how the concept of informal economy can be applied in developed country contexts, paying particular attention to informal employment per se. Rather than simply drawing an analogy between informal employment and various forms of employment that diverge from the historical norm of paid employment in developed countries, this paper uses the definition of informal economy (particularly informal employment), and some of the thinking that has emerged from analyses of developing countries, and applies them to developed countries.

This working paper addresses the question of whether and how the concept of the informal economy applies to labour market patterns in developed countries in three ways. First, it outlines how the broad notion of informal economy relates to developed economies. Next, it reviews some theories about the informal economy related to changes in employment in developed countries, focusing primarily on the relationship between informality and regulation. Subsequently, this paper discusses how the statistical definition of informal employment, the 17th International Conference of Labour Statisticians definition, can be used in the case of developed countries’ labour markets. The paper closes by revisiting the positives and caveats regarding bridging developing and developed country analyses.

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