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Tackling entrepreneurship in the informal economy: evaluating the policy options

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  • Colin C. Williams
  • Sara J. Nadin

Abstract

Purpose - Although there is emerging an understanding that many entrepreneurs conduct some or all of their transactions off‐the‐books, there has so far been little attempt to consider what can and should be done about entrepreneurship in the informal economy. The purpose of this paper is to bridge this gap. Design/methodology/approach - Following a review of what is known about the prevalence and nature of informal entrepreneurship, this paper evaluates what can and should be done about informal entrepreneurs by analyzing the various policy options and their implications. Findings - Evaluating the possible policy approaches of doing nothing, eradication, de‐regulation and facilitating formalisation, the finding is that doing nothing leaves intact the existing negative impacts on formal and informal businesses, customers and governments, whilst eradicating informal entrepreneurship results in governments stamping out precisely the entrepreneurship and enterprise culture that they wish to nurture, and de‐regulation results in a levelling down rather than up of working conditions. Only facilitating the formalisation of informal entrepreneurship is found to be a viable policy approach. How this might be achieved is then considered. Research limitations/implications - More research is required on the hurdles informal entrepreneurs witness when seeking to legitimize their business ventures in different populations before it can be known whether specific policy measures to facilitate formalisation are appropriate. Practical implications - This paper evaluates various public policy options for tackling informal entrepreneurship and their impacts. Originality/value - This is one of the first evaluations of the policy options available for tackling informal entrepreneurship.

Suggested Citation

  • Colin C. Williams & Sara J. Nadin, 2012. "Tackling entrepreneurship in the informal economy: evaluating the policy options," Journal of Entrepreneurship and Public Policy, Emerald Group Publishing Limited, vol. 1(2), pages 111-124, October.
  • Handle: RePEc:eme:jepppp:v:1:y:2012:i:2:p:111-124
    DOI: 10.1108/20452101211261408
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    Citations

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    Cited by:

    1. Cavotta, Valeria & Dalpiaz, Elena, 2022. "Good apples in spoiled barrels: A temporal model of firm formalization in a field characterized by widespread informality," Journal of Business Venturing, Elsevier, vol. 37(2).
    2. Halil Dincer Kaya, 2017. "The Characteristics Of Small Firms That Serve As Owners’ Primary Employment," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 5-13, February.
    3. Alexander Libman & Janis N. Kluge, 2017. "Sticks or Carrots? Comparing Effectiveness of Government Shadow Economy Policies in Russia," Working Papers 364, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    4. Eunice Santos & Cristina I. Fernandes & João J. Ferreira & Carla Azevedo Lobo, 2021. "What Is the Impact of Informal Entrepreneurship on Venture Capital Flows?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(4), pages 2032-2049, December.
    5. Amanda J. Muhammad & Alina M. Waite & Dwuena C. Wyre, 2019. "Informal Sector Retail Start-Ups In A Caribbean Context," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 24(02), pages 1-15, June.
    6. Boris Urban & Brian Ndou, 2019. "Informal Entrepreneurship: A Focus On South African Township Entrepreneurs," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 24(04), pages 1-19, December.
    7. Janis N. Kluge & Alexander Libman, 2018. "Sticks or Carrots? Comparing Effectiveness of Government Informal Economy Policies in Russia," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(4), pages 605-637, December.
    8. Estevão, João & Lopes, José Dias & Penela, Daniela, 2022. "The importance of the business environment for the informal economy: Evidence from the Doing Business ranking," Technological Forecasting and Social Change, Elsevier, vol. 174(C).

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