Informal Self-Employment: Poverty Trap or Decent Alternative?

  • William F. Maloney


Fifty years of scrutiny have not yielded a verdict on the character of the informal self-employed sector.1 One perspective, articulated most sharply by the International Labor Organization (2002), views the sector as having a deficit of “decent” work— “decent” encompassing the state of being unprotected and unrepresented by formal labor institutions. In fact, enough unsavory qualities are rumored about the informal sector to invite not only criticisms about its decency, but condemnations as a full-fledged poverty trap. Critics point to higher levels of poverty, lower incomes adjusted for human capital, lower rates of productivity growth of informal firms, and more volatile incomes—which, combined with a lack of labor protections, suggests that the sector is more precarious.


Labor Market Minimum Wage Formal Sector International Labor Organization Poverty Trap 
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Copyright information

© The International Bank for Reconstruction and Development / The World Bank 2003

Authors and Affiliations

  • William F. Maloney
    • 1
    • 2
  1. 1.University of CaliforniaBerkeley
  2. 2.Universidad de Los Andes in BogotaColombia

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