The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Informal Economy

  • Keith Hart
Reference work entry


The informal economy or sector has become the preferred term for unregulated economic activities, in both rich and poor countries. Based on Weber’s theory of rationalization, it was coined during the early 1970s in response to proliferating self- employment and casual labour in Third World cities. Now its range of reference is very wide, embracing everything from high-level political corruption to home improvement. The phenomenon is real enough and of some antiquity, but its definition remains elusive. Operating beyond the rules of bureaucracy, the informal economy may be understood dialectically as division, content, negation or residue.


Bureaucracy Capital accumulation Economic development in the long run Exploitation Informal economy Labour surplus economies Poverty Protection Rational enterprise Rule of law Rural–urban migration Self-employment Weber, M. 

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Keith Hart
    • 1
  1. 1.