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The Informal Economy in South Africa: Debates, Issues and Policies

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  • Imraan Valodia
  • Richard Devey

Abstract

The idea of dualism in the South African economy, characterised by a ‘first’ and ‘second’ economy, has come to dominate government thinking in recent years. Using the panel component of the Labour Force Survey (LFS), we explore linkages between the formal and informal economy. Our analysis suggests that there is a high level of interaction between formal and informal work at the lower end of the labour market. At the household level too, access to stable employment in the formal economy is associated with higher levels of earning in the informal economy. Our findings have implications for poverty analysis in South Africa. Policy which views poverty as being located outside the mainstream of the economy—in the so-called ‘second economy’—is misleading. JEL Classifications : O17, O55

Suggested Citation

  • Imraan Valodia & Richard Devey, 2012. "The Informal Economy in South Africa: Debates, Issues and Policies," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 6(2), pages 133-157, May.
    • Handle: RePEc:sae:mareco:v:6:y:2012:i:2:p:133-157
    DOI: 10.1177/097380101200600203
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    References listed on IDEAS

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    1. Andre Ligthelm, 2008. "A targeted approach to informal business development: the entrepreneurial route," Development Southern Africa, Taylor & Francis Journals, vol. 25(4), pages 367-382.
    2. Tokman, Victor E., 1978. "An exploration into the nature of informal--formal sector relationships," World Development, Elsevier, vol. 6(9-10), pages 1065-1075.
    3. Gerry Rodgers, 2007. "Labour Market Flexibility and Decent Work," Working Papers 47, United Nations, Department of Economics and Social Affairs.
    4. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
    5. repec:ilo:ilowps:398678 is not listed on IDEAS
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    Cited by:

    1. Dasgupta, Nandini & Lloyd-Jones, Tony, 2018. "Heterogeneity and vulnerability in the urban informal economy: Reworking the problem in the current context. The case of uganda," World Development Perspectives, Elsevier, vol. 10, pages 64-72.

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    More about this item

    Keywords

    Formal; Informal; Employment; Households; Poverty;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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