The informal economy

Abstract

This article continues a line of argument, initiated in Futures∗, suggesting that a wide range of services which were once produced in the money economy are increasingly provided informally—on a self-service basis. The informal economy contains a diverse collection of activities that may be divided into three categories: the household, the communal, and the underground. This last in turn covers a wide range, from outright theft, to tax evasion and moonlighting. Government taxation and welfare policies, changes in lifestyles, and the self-service economy combine to make the informal economy a sector of growing importance. Governments have three options: they can ignore the informal economy, suppress it, or exploit it. The last appears preferable, but would require some initiatives from the state.