This paper attempts to understand the nature of the impact informality has on inclusive growth by comparing the cases of Colombia and South Africa: two upper-middle income countries with very different views and government approaches to the issue.
Colombia and South Africa are both upper-middle income countries struggling to break out of the middle-income trap, yet current debates surrounding informality in the two countries are very different. In South Africa, the informal sector tends to be viewed as a way of reducing unemployment and consequently national policy aims to promote self-employment through entrepreneurship. In Colombia, on the other hand, informality tends to be viewed as a constraint on the growth of the formal sector and consequently the national policy aims to control it.
These apparent differences led to the following three questions:
- Is labour informality positive or negative for inclusive growth, understood as growth accompanied by lower inequality?
- Is the answer to question 1 the same for all types of workers in a country?
- Are the policy recommendations to improve inclusive growth through informality the same for all types of workers?
This comparative evidence paper attempts to answer these three questions simultaneously.
Source: Practical Action
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