Synthesis documents

Re-thinking the Approach to Informal Businesses: Typologies, Evidence and Future Exploration, WBG 2020

    Based on a review of relevant literature on informality and efforts to promote formalization, this paper will discuss the use of the term “informality” to align with the heterogeneity that exists within the informal sector and to identify factors that drive formality.

    From there, the paper proposes four specific areas for additional research and pilot interventions:

    (1) supporting informal clusters;
    (2) providing support to informal businesses without formalization as a target;
    (3) developing simplified, intermediate, and temporary legal statuses for informal businesses to better align with business needs and government goals; and
    (4) understanding behavioral insights that influence businesses’ decisions to remain informal and that can contribute to effective policy making.

    Throughout this discussion, the authors aim to motivate development and testing of new approaches to informality based on a deepened understanding of the needs of informal businesses.