Peripheral accumulation in the world economy: A cross-national analysis of the informal economy

Abstract

The persistence and growth of the informal economy have puzzled researchers and challenged mainstream explanations of the development of the informal economy. This study utilizes a world-systems approach for explaining cross-national variation in the size of the informal economy for a sample of 74 developing and developed countries observed over a recent 8-year period (1999-2007). According to this approach, the informal economy is a characteristic of peripheral accumulation in the world economy and its development is driven by unequal exchange in international trade and foreign capital penetration. Based on estimates from random and fixed-effects regression models using multiple measures of world-system position, countries in the periphery and semi-periphery of the world economy have larger informal economies than core countries. More importantly, this difference in the development of the informal economy between the core, semi-periphery, and periphery is partially explained by the effects of international trade and foreign direct investment. Overall, the findings indicate that the development and persistence of the informal economy are driven by the structure of the world economy and processes of economic globalization.

Explaining participation in the informal economy: An institutional incongruence perspective

“…On the one hand, and grounded in a structuralist perspective, participation in the informal economy is viewed to result from people's 'exclusion' from state benefits and the formal labour market. Viewing the informal economy as an inherent feature of contemporary capitalism and a direct result of employers seeking to reduce costs, such as by sub-contracting to businesses employing informal labour under 'sweatshop-like' conditions (e.g., Hapke, 2004;Ross, 2004) and the 'precarious' or 'false' self-employed, informal workers are characterised as marginalised populations conducting such work out of necessity and as a last resort (Davis, 2006;Roberts, 2013;Slavnic, 2010).…”

Labor Laws and Shadow Economies: A Cross‐National Assessment

“…Within extant literature, one strand notes that structural and macroeconomic factors such as unemployment and economic stagnation encourage growth in the shadow sector (Roberts, 2013;Bajada and Schneider, 2009), as informal employment can be indicative of exclusion from the formal sector due to the lack of opportunities (Williams, Horodnic, and Windebank, 2015). However, other empirical work in the area attests to an underlying rationalist logic behind entry into the shadow sector.…”

Beyond the marginalisation thesis: evaluating participation in informal sector entrepreneurship

“…The increasing functional integration of a single global economic system is seen as resulting in subcontracting and outsourcing becoming a primary means of integrating employment in the informal sector into contemporary capitalism. Viewed through this conceptual lens, the informal sector is an inherent feature of contemporary capitalism and a direct result of employers seeking to reduce costs, such as by sub-contracting to the 'precarious' or 'false' self-employed in the informal sector, and such work is again seen to be conducted by marginalized populations excluded from formal jobs and formal welfare support who conduct such work out of necessity and as a last resort (Castells and Portes 1989;Davis 2006;Gallin 2001;ILO 2002;Roberts, 2013;Slavnic, 2010).…”