ABSTRACT
This chapter discusses the formal institutional failings and imperfections that are determinants of this institutional asymmetry. It explains the prevalence of informal entrepreneurship to identify the main formal institutional failures and imperfections to evaluate. The chapter reviews modernisation theory and sets out each of key factors which it views as determining the prevalence of informal entrepreneurship. It then turns its attention to political economy theory and its view that inadequate state intervention and protection of workers determine the level of informal entrepreneurship. The chapter addresses neo-liberal theory and how it views too much government intervention in the form of high taxes and burdensome regulations as the key drivers of entrepreneurship in the informal sector. Informal entrepreneurship is thus the people's 'spontaneous and creative response to the state's incapacity to satisfy the basic needs of the impoverished masses'.
