Transition to formality

Transition to Formality and Structural Transformation: Challenges and Policy options

The book examines “new forms of informality” in developed and developing countries, and how our policies can be improved to respond to new evolving realities.

This diverse collection of essays on the transition to formality across different parts of the world entails a rich juxtaposition of analyses and evidence. The central premise of this volume is that the challenge of structural transformation – i.e. moving people and resources out of low productivity to high productivity sectors –primarily occurs along the formal-informal divide. It shows that while sustained economic growth eventually leads to a sustained reduction in the size of the informal economy, the process is too long and uncertain. Hence, policy activism is required based on a holistic strategy cutting across macroeconomic, sectoral, labour market and regulatory policies.

This message is in striking contrast to the view that the transition to formality essentially presupposes a reduction in the regulatory burden on the business community that will incentivize opportunistic actors to step out of the shadows and operate in a transparent and accountable environment. The numerous novel insights and conclusions generated by the authors of the book provide vital information to guide global and national policies to improve the world of work of those deriving their livelihood from the informal economy.