Factors impacting on the urban informal sector: seven country studies including PNG
by Philip Sawi Kavan
International Journal of Economic Policy in Emerging Economies (IJEPEE), Vol. 6, No. 3, 2013

Abstract: The theoretical framework used in this paper combines the Ranis-Fei model with the Harris-Todaro model. A comparative country study approach is adopted. The paper demonstrates that in the case of labour surplus countries like India, Brazil, and Philippines, the urban informal sector developed much earlier than in the land surplus countries such as Fiji, Ghana, and Zimbabwe. The major factors, which have impacted on the growth of this sector, have been the growth of the economy, the historic size of the number of agricultural labourers and the rural informal sector and the urban-rural income gap. Policies to provide credit to the rural informal sector have had some dampening impact on the growth of the urban informal sector. Policies to curb the activities in the urban informal sector have had some impact and were more common in some of the land surplus countries during the colonial period. In the long run, without dampening population growth and accelerating economic growth, it is difficult to reduce the size of the urban informal sector. In the short to medium run, it may help to reduce any restrictions on the urban informal sector, so as to absorb the growing labour force. But this may run into opposition from the formal sector and the general public.

Online publication date: Sat, 28-Jun-2014

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