Rethinking the effect of informality on inclusive growth: lessons from Colombia and South Africa for their regions

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:

  1. Is labour informality positive or negative for inclusive growth, understood as growth accompanied by lower inequality?
  2. Is the answer to question 1 the same for all types of workers in a country?
  3. 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

This article is culled from daily press coverage from around the world. It is posted on the Urban Gateway by way of keeping all users informed about matters of interest. The opinion expressed in this article is that of the author and in no way reflects the opinion of UN-Habitat.

Kezia Lilenstein, Morné Oosthuizen, Cristina Fernandez, Leonardo Villar, Juan Camilo Medellin, Francisco Fernandez