Strategy and Competitiveness in Latin American Markets

Strategy and Competitiveness in Latin American Markets

The Sustainability Frontier

Edited by Urs P. Jäger and Vijay Sathe

Using a combination of thorough research and practical examples, Strategy and Competitiveness in Latin American Markets explains how the concept of the sustainability frontier that the book develops resolves the long-running debate on whether sustainability requires tradeoffs or not. Through its exploration of a variety of sustainability challenges and opportunities, along with various sustainability models, the authors show how the sustainability frontier can be expanded through disruptive innovation, the building of new skills and by other means to secure no-trade off solutions.

Chapter 6: Informal economy

Keith L. Whittingham

Subjects: business and management, management and sustainability, strategic management


The term ‘informal economy’, while evading universal definition, generally refers to those productive sectors of an economy that fall outside of the typical scope and reach of governmental regulatory and administrative frameworks. In general, the activities in this sector go unreported to official institutions for one of two reasons: (1) illegality of the productive activity itself or (2) evasion of costs associated with formalizing a legal activity (e.g. license fees, taxes or labor costs) (Vuletin, 2008). Beyond the economy of the informal sector, there is also informal employment in the ‘formal’ economy, in which a regulated enterprise may underreport production and/or employment for reason 2 above (ILO Department of Statistics, 2011). While the nature of the informal economy makes it very difficult to measure accurately, various direct and indirect approaches have been taken to estimate its size. Based on direct measures (household surveys), the ILO estimates that over 50 percent of non-agricultural workers in Latin America are engaged in informal employment (ILO Department of Statistics, 2011). Roughly one-third of all non-agricultural employees are employed in the informal sector. Enterprises in this sector are typically small family businesses with relatively few employees, so this proportion represents a large number of small enterprises. When the agriculture sector is considered, with its heavy reliance on smallholder farming, the number of enterprises participating in the informal productive sector increases significantly.

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