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Article
Publication date: 27 September 2021

Jaqueline Pels, Luis Araujo and Tomas Andres Kidd

In developing economies, 30% of the gross domestic product on average is undertaken by unregistered businesses. The informal economy leads to high opportunity costs by…

Abstract

Purpose

In developing economies, 30% of the gross domestic product on average is undertaken by unregistered businesses. The informal economy leads to high opportunity costs by preventing gains from trade with strangers. To overcome this obstacle, sellers who usually operate in the informal economy should strive to move to formal markets. Current theories are drawn from a view of markets as institutions governed by formal and informal rules. In a nutshell, informal-formal market transitions must be met with a regulative solution. However, the overall results have been disappointing. This failure invites a re-diagnosis of the problem that informal sellers face to act in formal markets and suggesting novel solutions. This paper aims to address this gap.

Design/methodology/approach

This is a conceptual paper. The authors adopt MacInnis’s (2011) framework to characterize the approach to theory development.

Findings

The authors argue that extant views of formal/informal markets differences address only one of Scott’s (2014) three pillars (regulative, normative and cultural-cognitive). By drawing on Bourdieu’s legacy, the authors propose a cultural-cognitive reading of institutions and suggest it offers a lens to understand the problem as an access challenge, and thus a marketing problem. This perspective allows us to conceptualize informal/formal markets as two distinct institutional fields and argues that all individuals inhabit a particular habitus and contend that moving between markets requires a habitus shift. Thus, acting in formal markets involves bridging a habitus gap. Finally, the authors argue the need for a market-facing intermediary that takes on a market habitus bridging role.

Research limitations/implications

The authors suggest future research efforts could benefit from this new conceptual lens as a means of re-diagnosing other forms of market access that have produced disappointing results.

Practical implications

By looking at differences between formal and informal markets as a habitus gap, the allocation of public funds to support transitions can be better targeted and spent.

Social implications

The concept of market-facing intermediaries suggests that the beneficiary (e.g. informal seller) and target populations can be different. This insight could catalyze social innovation and trigger novel perspectives to design systemic solutions.

Originality/value

Conceptualizing the formal-informal market transition as a habitus gap suggests new directions to resolve access challenges and a new mediator solution.

Details

Journal of Business & Industrial Marketing, vol. 37 no. 6
Type: Research Article
ISSN: 0885-8624

Keywords

Article
Publication date: 5 February 2018

Sanda Renko and Kristina Petljak

Despite modern retail formats, for many cultures, informal markets (street markets, farmers’ markets, or wet markets in Asia), fleas, and bazaars still remain an important…

Abstract

Purpose

Despite modern retail formats, for many cultures, informal markets (street markets, farmers’ markets, or wet markets in Asia), fleas, and bazaars still remain an important part of life. The purpose of this paper is to provide further insight into the characteristics of informal retailers, and to explain their growth and longevity in markets.

Design/methodology/approach

In order to explore what attracts customers to informal retail markets, a survey conducted on the sample of Croatian consumers was carried out.

Findings

The results show that consumers point out fresh, affordable, and healthy products and relationships with vendors as the main advantages, while weather conditions, unattractive food, and crowds are the disadvantages and barriers of purchasing at informal markets.

Practical implications

The results presented give directions for various subjects on how to increase the popularity of informal markets.

Originality/value

This paper addresses consumers’ perception of informal markets in the context of an emerging country. With the literature review, and the results of the explorative survey, it contributes to the knowledge on this type of retailing.

Details

British Food Journal, vol. 120 no. 2
Type: Research Article
ISSN: 0007-070X

Keywords

Article
Publication date: 24 August 2021

Victor Olutope Ige and Job Taiwo Gbadegesin

This paper examines why some sets of people choose an informal way to acquire land. It also examines challenges and drivers within indigenous communities in South-western…

95

Abstract

Purpose

This paper examines why some sets of people choose an informal way to acquire land. It also examines challenges and drivers within indigenous communities in South-western Nigeria. Policy recommendations were proposed for formalization. What precisely are the contextual reasons that can be established empirically for the prevailing extra-legal practices in the developing land market? What are the challenges, and how can the informal land market be graduated into the formal system?

Design/methodology/approach

It begins with identifying the contextual features, drivers and challenges of the informal land market through a combination of literature synthesis and a pilot survey. Subsequently, copies of questionnaires were developed, tested and distributed to the critical actors in the informal land market. Lastly, a structured interview was conducted to elicit possible solutions from key actors (both formal and informal stakeholders). Data were analyzed using descriptive, inferential statistics and computer-aided qualitative data analysis software (CAQDAS, Atlas. ti).

Findings

The absence of administrative bureaucracy was the predominant characteristic of the informal urban land market, while household income is the strongest predictor of the informal land market drivers. Informal documentation of transactions is also one of the most severe challenges in the informal urban land market. Consensus between statutory and customary institutions and other 15 governance-related recommendations is proposed to confirm informality to formality.

Originality/value

The paper's outcome will provide a rational guide to landowners, land administrators and other stakeholders on relevant information needed to develop a viable and healthy urban and rural land market.

Details

Property Management, vol. 40 no. 1
Type: Research Article
ISSN: 0263-7472

Keywords

Article
Publication date: 1 August 2008

Gudrun Vande Walle

The informal economy is more than the inverse of the formalised economy, but is a dynamic environment. It is less limited by legal rules, state control, bureaucracy or tax…

1178

Abstract

Purpose

The informal economy is more than the inverse of the formalised economy, but is a dynamic environment. It is less limited by legal rules, state control, bureaucracy or tax regulation. On the other hand the informal market is less visible than the regular economy. The purpose of this paper is to find out how informal markets are currently developing.

Design/methodology/approach

This contribution is based on a literature review of primarily European work from scholars active in different disciplinary fields, concentrating upon presentations made during the seminars given for the EU Framework 6 CRIMPREV programme. It is structured using a matrix of potentially interesting variables: disciplinary interaction and the need for a multidisciplinary discourse; the position of nation states as a fundamental variable for the existence of the informal economy; general global economic dynamics and their implications for the concept of the informal economy; the interplay of formal, informal and criminal markets; the functionalities of informal markets for the classic survival economy; the dangerousness of wrong perceptions of informal markets and finally the contribution of different methodologies to the knowledge of the informal economy.

Research limitations/implications

The matrix is incomplete and further input is welcome.

Originality/value

This paper could be a start for the comparison of analyses of informal markets in time and space, without the limitations of the classic categories such as organised crime and in limiting definitions.

Details

International Journal of Social Economics, vol. 35 no. 9
Type: Research Article
ISSN: 0306-8293

Keywords

Abstract

Details

The Impacts of Monetary Policy in the 21st Century: Perspectives from Emerging Economies
Type: Book
ISBN: 978-1-78973-319-8

Article
Publication date: 1 February 2000

John C. Cross and Bruce D. Johnson

Attempts to theorize the relationship between the informal and the illegal sectors of the economy. States that there are significant behavioural similarities. Proposes an…

Abstract

Attempts to theorize the relationship between the informal and the illegal sectors of the economy. States that there are significant behavioural similarities. Proposes an emergent paradigm based on dual labour market theory to explain the similarites and differences in order to guide future research in each area. Applies the theory to the production and marketing of crack cocaine and shows how the model helps us to understand issues of exploitation and risk makagement within the drug market.

Details

International Journal of Sociology and Social Policy, vol. 20 no. 1/2
Type: Research Article
ISSN: 0144-333X

Keywords

Article
Publication date: 16 April 2019

Malik Shahzad Shabbir

This study aims to explore how informal pawnbrokers and informal pawners interpret the existence of the informal pawnshop in the traditional market in Surakarta…

Abstract

Purpose

This study aims to explore how informal pawnbrokers and informal pawners interpret the existence of the informal pawnshop in the traditional market in Surakarta, Indonesia, with the main focus to determine the applicability of informal pawnshop development model.

Design/methodology/approach

The research used the qualitative method with the phenomenological approach using interview method to fully comprehend the informants’ views regarding the informal pawnshop existence in traditional markets in Surakarta, Indonesia. The applicability of informal pawnshop development model is required for Muslim market vendors. Charitable institutions shall participate in the development of the model by empowering (zakat, infaq, shadaqah and waqf) funds to help Muslims vendors in the traditional markets for additional capital in accordance with Islamic laws for a pawnshop.

Findings

The result of the research shows that the existence of informal pawning in the traditional markets is difficult to avoid as both informal pawnbrokers and informal pawners need one another. Most vendors in the traditional markets are Muslims. Islam teaches that loan interest is categorized as forbidden riba. Meanwhile, in the informal pawning practices, the informal pawnbrokers charge loan interest to the informal pawners.

Originality/value

The objective of this study is to investigate to what extent the Islamic pawn shops motivated the people through interest-free system. However, in past, tradition markets facilitate the people, but they charged a huge against it with interest (riba).

Details

Journal of Islamic Marketing, vol. 11 no. 2
Type: Research Article
ISSN: 1759-0833

Keywords

Book part
Publication date: 16 November 2016

Claudia Trentini

In the last decade, Argentina has experienced a considerable decline in informal employment and wage dispersion. This paper extends a search model with exogenous human…

Abstract

In the last decade, Argentina has experienced a considerable decline in informal employment and wage dispersion. This paper extends a search model with exogenous human capital accumulation to include the informal sector. The model is parametrized to match Argentinian data between 1996 and 1998 – before the onset of the declining trend – and it is used to investigate the contribution of labor market measures to the falling informality, unemployment, and wage dispersion. The findings indicate that institutional factors did not contribute to the positive labor market trends observed; on the contrary, results show that higher severance pay and minimum wages increase informality and that the introduction of unemployment assistance contributed to the spread of informal contracts across the work force. Further, I find that compliance with minimum wage regulation strongly affects the final impact of these policies. While non perfect compliance might reduce unemployment, it reinforces the incentives of workers to move to the informal sector.

Details

Inequality after the 20th Century: Papers from the Sixth ECINEQ Meeting
Type: Book
ISBN: 978-1-78560-993-0

Keywords

Article
Publication date: 11 September 2017

Aysit Tansel and Elif Öznur Acar

This paper, the first one to use individual-level Turkish panel data, examines the labor market transitions in Turkey along the formal/informal employment divide. The…

Abstract

Purpose

This paper, the first one to use individual-level Turkish panel data, examines the labor market transitions in Turkey along the formal/informal employment divide. The purpose of this paper is to contribute to the limited body of empirical evidence available on mobility and informality in the Turkish labor market.

Design/methodology/approach

Toward this end, the authors use Turkish income and Living Conditions Survey panel data for 2006, 2007, 2008 and 2009 to compute the Markov transition probabilities of individuals moving across six different labor market states: formal-salaried (FS), informal-salaried, formal self-employed, informal self-employed, unemployed and inactive. In order to examine the nature of mobility patterns in more detail, the authors then estimate six multinomial logit models individually for each transition adopting a number of individual and employment characteristics as explanatory variables.

Findings

The authors find evidence that mobility patterns are fairly similar across different time spans, the probability of remaining in initial state is higher than the probability of transition into another state for all the labor market states, except for unemployment, there is only very limited mobility into the FS state. Gender, education and sector of economic activity are observed to display significant effects on mobility patterns. The results reveal several relationships between the covariates and likelihood of variant transitions.

Research limitations/implications

This study provides a comprehensive and detailed diagnosis of the Turkish labor market. The market is observed to display a rather static structure throughout the period considered. The results indicate that a well recognition of underlying dynamics may help policy makers to produce various effective tools for addressing informality.

Originality/value

First study to analyze labor market mobility across formal/informal sectors using newly available panel data.

Details

Journal of Economic Studies, vol. 44 no. 4
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 26 June 2018

Hongshik Lee and Minseok Park

The existing literature on aid for trade (AfT) tends to support the effectiveness of AfT in improving trade capacities and enhancing the export performance of recipient…

Abstract

Purpose

The existing literature on aid for trade (AfT) tends to support the effectiveness of AfT in improving trade capacities and enhancing the export performance of recipient countries. While aid directed at trade-related infrastructure (e.g. ports and roads) is reported to drive the overall effect of AfT, the increasing importance of labor market flexibility and informal labor in export environment has been largely overlooked. The purpose of this paper is to test two hypotheses regarding the relationship between labor market flexibility, exports and AfT. First, flexible labor regulation promotes exports by reducing adjustment costs related to the export process. Second, for informal labor-intensive export sectors, AfT effectiveness may be compromised by the contraction of the informal sector due to labor deregulation as it deteriorates comparative advantage that supports recipients’ export competitiveness.

Design/methodology/approach

Since first introduced by Tinbergen (1962), the gravity model has been widely used to analyze bilateral trade, and its usefulness has been verified in several prominent empirical studies (e.g. Anderson and van Wincoop, 2003; Helpman et al., 2008). However, despite the empirically successful framework of the gravity model, the standard gravity equation may not be appropriate for estimating the effect of AfT in the paper. The main interest lies in whether aggregate AfT flows enhance the export “performance” of individual recipients, that is, whether they improve the recipients’ total exports rather than their bilateral exports. For this purpose, the authors took aggregated approach to the gravity model from Anderson and van Wincoop (2003).

Findings

The findings suggest that while both AfT and labor market flexibility are positively associated with higher export levels, the export-promoting effect of AfT is marginally reduced by the contraction of informal workforce. These findings, however, only hold for export sectors that heavily rely on informal labor force, that is, primary commodities and resource/labor-intensive goods. The authors also find that these effects are stronger in low-income countries, indicating that the AfT initiative has been effective where it is needed the most.

Originality/value

This paper is the first attempt to analyze the relationship between AfT and exports with consideration of labor market flexibility. Using the data for 85 recipient countries, the authors test the following hypotheses. First, labor market flexibility promotes exports by reducing adjustment costs related to the exporting process. Second, the contraction of the informal sector due to labor deregulation deteriorates developing countries’ comparative advantage in certain export sectors. Hence, while both AfT and labor market flexibility are expected to enhance the export volume of developing countries, the loss from weaker comparative advantage in a form of smaller informal labor force can exceed the gains from AfT in certain sectors.

Details

Journal of Korea Trade, vol. 22 no. 2
Type: Research Article
ISSN: 1229-828X

Keywords

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