This website uses cookies to ensure you have the best experience. Learn more

Informal Economy And Poverty Alleviation Essay

1666 words - 7 pages

Subject area
Any sovereign state is to some extent concerned about the existence of informality in its economy. Although the subject of informal economy is broadly presented in interdisciplinary research, it remains understudied, especially from an entrepreneurship perspective in developing context (Castro, Khavul, & Bruton, 2014). At the same time the problem of poverty alleviation is particularly up-to-date in the light of millennium development goals, first of which is eradication of extreme poverty and hunger. Poverty alleviation programs mostly rely on the increasing involvement of ‘bottom quintile’ private sector in economic activity through various development programs. In this light the effect of informality on productivity and growth is much debated(Castro et al., 2014). On the one hand, informal economy is one of the main factors undermining the effectiveness of reforms in private sector development, because microfinance programs and other benefits, received from formality are underutilized. On the other hand, given the fact that financial systems in developing counties are not consistent with the needs of poor, the existence of informal sector is a response to the shortcomings of the formal sector (Bakhtiari, 2006). To which extent inefficiency, created by the presence of informal sector affects the dynamics of well-being of developing society? Which positive effects informality brings and why informality is a persistent phenomenon in developing countries? There exist established answers in this research field, and this paper plans to synthesize them to reveal new determinants and effects of informality. For example, in such countries as Kyrgyzstan the level of informal economy is about 40% of the total GDP (the number is obtained using the mix of survey and ‘standard’ procedures such as electricity consumption and MIMIC), the main part of it consists of micro enterprises, whose growth is bounded by the costs associated with formality, which demonstrates the extreme importance of the question. Informality in Kyrgyzstan is an interiorized and self-sustained category and the steps to changing the situation must contain a complex of measures, including social and psychological incentives.
Literature review
When talking about poverty reduction, a growing body of literature highlights the necessity of taking into account informal economy (Hillenkamp, Lapeyre&Lemaître, 2013). Informal economy is extremely multi-faceted subject, with complex social, legal and institutional determinants. Some authors see informality and underdevelopment as synonyms (Loayza & Rigolini, 2006) and use the terms interchangeably. In order to understand the influence of informal economy on poverty we need to define the nature of connection between two terms. Behavioral studies highlight the decision of individual based on relevant cost-benefit analysis. Experimental evidence shows that even after the direct costs of registration and information costs were...

Find Another Essay On Informal Economy and Poverty Alleviation

UN-HABITAT and the Post-2015 Development Agenda

610 words - 3 pages “Much has been done to achieve [poverty alleviation and development through] aid, donations and international support. However, after dozens of years of such efforts, we are still witnessing deepening poverty, poor living standards and lack of social and economical mobility among many in the developing world,” the Weitz Center for Development Studies, TAG International Development, and Israel’s Agency for Development Cooperation (MASHAV

Impact of Poor Governance and Income Inequality on Poverty in Pakistan

1657 words - 7 pages measures of good economic governance, was a mixture signifying deterioration and downfall in 1990s. He recommended that economic management and governance in Pakistan has to be excellent if Pakistan has to achieve above average economic growth and reduced poverty levels. Sumarto, Suryahadi and Arifianto (2004) empirically examined the impact of bad governance on poverty alleviation in Indonesia. Their study showed that the poor are thoroughly

Can market forces and free competition alleviate the poverty? - Queen Mary University of London - Essay

2405 words - 10 pages initiatives like ‘CSR’ ,which will be discussed in the first section.On the other hand,some possible explanations,such as invisible regime indirect or direct control on the political economy of poor regions,drawbacks of informal markets as well as powerless business behaviour,will be discussed specifically to consider in which way corporate activities tend to contribute to poverty. OPTIMISM AND OPENING ECONOMY Actually ,it is unfair to completely deny

HOW CAN LOCAL GOVERNMENTS BE CATALYSTS FOR PRO – POOR ECONOMIC DEVELOPMENT?

1822 words - 7 pages respond to popular pressures to influence the direction of growth, and implement local development strategies to increase local employment and welfare (Global Forum on Local Development: 2010).PROBLEM STATEMENTHigh levels of poverty in South Africa continue to be a cause of concern. Current interventions and programmes aimed at reducing poverty levels in the country have had very limited impact on poverty alleviation. According to Leatt, Rosa and Hall

The ILO/WTO Joint Report on Informal Employment

1210 words - 5 pages (such as this report). Through its dispute settlement body, the WTO can address the issues of government practices that unfairly encumber foreign investment and its resultant impediment to hiring. Increased Informality’s Impact on Local Formal Economy and Foreign Investment According to the WTO, increased informal activity provides a drain on the formal economy. It acts as a “poverty trap” that workers enter as a survival mode; upon entering the

MicroFinance

1072 words - 4 pages Performance of Microfinance Sector 1CHAPTER 1: INTRODUCTION1.1 Overview of MicrofinanceMicrofinance is a tool to eradicate poverty from the developing countries. It can be stated as the supply of money in the form of loans and other financial services to the poor sector of the country. As the poor people cannot full fill the collateral requirements of the commercial banks so they are left behind in attaining these financial services by the

Child Poverty

974 words - 4 pages POVERTY IS THE WORST FORM OF INJUSTICE." Mahatma GandhPoverty is a serious issue jeopardizing our economy and societyWhile poverty is characterised as a state of 'not having enough to meet our daily needs'A household is considered poor if its income resources fall below a certain minimumthreshold called the poverty line.In 2006/07, the poverty line is estimated at Rs 3,821,In the budget speech 2013, the Minister of FINANCE , has declared its

Developing the Third World

2218 words - 9 pages services offered by microfinance have the ability to promote economic development in poverty stricken families in the ‘third world’. Microfinance can be seen to promote the development of the third world through the alleviation of poverty, empowerment of women and increase their involvement in their economy. The mass momentum achieved by microcredit as a development strategy has cause discussion about its effectiveness in promoting development

Poverty

815 words - 3 pages of training will allow these less fortunate individuals to learn a skill, which they can use to make themselves employable or earn a higher wage. This will enable them to enjoy a better standard of living as they can better provide for themselves and their families.The injection of money into the economy by the government, foreign investment or foreign aid may help decrease poverty by creating jobs. People who were previously unemployed may be

Critique of the world banks method of calculating poverty

1247 words - 5 pages opposite manner as this happens because a Dollar in a richer country will be less valuable in buying goods from what the economy has for offer.Globally there is a shift towards the service sector. This shift has and will continue to create an impression, a false impression that there has been an alleviation of poverty, although in reality no such thing has occurred.Another problem according to Reddy and Pogge is the use of an arbitrary choice of PPP

"The history of the poor in Australia reveals that state interventions to ameliorate poverty are misguided."

1551 words - 6 pages solutions to poverty. Poverty is an overwhelming problem mankind has faced for many centuries. In capturing the Roe's (1976) quote, this paper argues that within capitalist, economic and political structure, the alleviation of poverty remains to be seen as state interventions are misguided.Pre 1960'sThe state has played a large role in the facilitation and development of the Australian economy. Secure in the knowledge that large sums of money were

Similar Essays

Waste Pickers And Collectors In Delhi: Poverty And Environment In An Urban Informal Sector ”

1115 words - 5 pages multiple informal sectors can be helpful to draw a more comprehensive picture of nationwide informal sectors. Works Cited Hayami, Yujiro, A. K. Dikshit, and S. N. Mishra. "Waste pickers and collectors in Delhi: poverty and environment in an urban informal sector." The Journal of Development Studies 42.1 (2006): 41-69.

Poverty And Its Effects On Society And The Economy

2208 words - 9 pages order to address the issue and help alleviate the problems faced by these countries. II. Poverty and Its Relevance It is an issue due to its disruptive effects to society and the economy. If people do not have access to clean waters, adequate food, and permanent shelter, it could lead to poor sanitation, polluted environment, and escalated crime and violence. There are many effects of poverty to people, such as unemployment, poor housing and

Impact Of Genetically Modified Foods On Poverty And Hunger Alleviation

967 words - 4 pages Research currently done in the field of biotechnology is aimed at producing crops that will have high yields through the use of genetically modified foods. Genetic engineering comprises of selective breeding that allows manipulation of genes either by altering or removing genes (Oniang'o, 2011, p.2). The impact of genetically modified foods on agricultural productivity and poverty eradication has for a long time been a source of controversy

To Determine The Extent To Which Poverty Played A Role In Forming Of The Society. Skidmore College Political Economy And Her Poor Research Paper

2003 words - 9 pages Andrew Wei Professor Lewis Research Summary Paper 2, Political Economy and Her Poor November 8th, 2016 2003 words Poverty as a Result of Structural Failure Poverty is defined as “the state or condition of having little or no money, goods, or means of support; condition of being poor (Dictionary.com).” According to the Huffington Post, currently 45million people live under the poverty line in the United States, representing 14.5% of the total