ABSTRACT
First, it is time to move away from simply being concerned with definitions and issues of identification to one where there is a recognition of the rapid growth and importance of the informal economy in the lives of the poor and an understanding of the process that continues to produce, maintain and increase informality in developing country settings. Moreover, the emphasis must now shift from establishing the linkages between the informal and the formal to analysing the exact nature of such relationships – how, when and why such relationships are exploitative, discriminatory and exclusionary, but also mutually beneficial, in nature. Most importantly, policymakers must show increased interest in understanding what motivates people, not just the poor, to continue to operate in the informal economy. Thus, policies must be designed to pay adequate attention to improving human capabilities, challenging power relations, and supporting the ability of the poor to shape their own life trajectories. This requires good institutions and understanding how such institutions can be developed.
