THE INFORMAL SECTOR IN DEVELOPING ECONOMIES

Abstract

This article explores the characteristics, significance, and challenges of the informal sector in developing economies. The informal sector, encompassing unregistered and unregulated economic activities, plays a crucial role in employment and income generation but is often associated with low productivity, poor working conditions, and limited social protection. The article reviews theoretical frameworks explaining informality, evaluates its impact on economic growth and poverty alleviation, and discusses policy approaches for formalization and support. Understanding the informal sector’s dynamics is essential for designing inclusive development strategies.