Theorising an E-government Approach Towards Formalising the Informal Economy

This chapter explains the reasons for participation in the informal economy and then shows how an e-government approach addresses these reasons. To do so, the starting point is recognition that over the past decade there has emerged a consensus on how to explain the informal economy. Previous theorisations of the informal economy have been synthesised by neo-institutionalist theory which explains the informal economy as arising when formal institutional failings lead to a gap between the formal rules of the game and social norms. Therefore, the first section of this chapter presents this neo-institutionalist theory. With this explanation in hand, the second section then discusses how an e-government approach can address the formal and informal institutional failings that result in participation in the informal economy. Third, and to display that there is indeed a relationship between improving e-government and participation in the informal economy, the current empirical evidence is reviewed that overwhelmingly reveals the statistically significant positive relationship between e-government and formalisation.