Chapter 2: The success story of a loose but useful concept: origins, development, magnitude and trends of the informal economy
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The concepts of informal sector, informal employment and informal economy have been internationally defined and are currently used as labour force and national accounts concepts. Often used as ‘umbrella’ or ‘soft’ concepts in the sense that they remain flexible in their national definitions, they allow for estimating the size and contribution of the informal economy at regional and even world level at different points in time. However, the concept of the informal economy continues to suffer from confusion and misunderstanding among scholars, who often generate their own definitions, ignoring or disregarding efforts made to establish definitions and to harmonise. One of the commonest and most misleading interpretations is that the informal economy is synonymous with the shadow economy, as estimated through modelling, rather than captured through surveys. This chapter reconstitutes the history of the concepts, outlines the improvements in methodologies for their measurement, and assesses the magnitude and trends of the informal economy and its main components at world and regional levels. It ends by discussing two shortcomings and pitfalls of the concept: challenges for measurement of pluri-activity and the so-called ‘missing middle’ or intermediate sector.

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Edited by Jacques Charmes