Join the new online discussion offered by the Rapid Response Web site on Private Sector Development.
How to Tackle the Problem of Rising Informality?
The number of informal firms – those operating beyond the reach of the law – is rising, accounting for more than 30% of developing world economic activity. Some policymakers believe this is not a serious problem, arguing that it is an indispensable lifeline for the most vulnerable. Others insist that informality carries high social and economic costs. They advocate radical reduction and simplification in regulations to encourage entrepreneurs to formalize – comply with legal requirements to start and run a business. One study of Egypt's informal sector shows that formalization can greatly improve a country's overall economic performance. Why do you think informality is growing almost everywhere, despite economic liberalization and stronger growth? What policy reforms do you think could help reverse this trend?
This online discussion is moderated by Vincent Palmade, lead economist at the Foreign Investment Advisory Service (FIAS) in the Private Sector Development Vice Presidency, a joint facility of the World Bank and International Finance Corporation; and Richard Stern, regional program coordinator for Central and Southern Africa at FIAS.