Informality: Causes, Consequences and Policy Responses

23 Pages Posted: 13 Nov 2017

See all articles by Ravi Kanbur

Ravi Kanbur

Cornell University; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

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Date Written: November 2017


A stylized prediction of the development economics discourse is that informality will disappear with development, and yet in the last 20 years conventional measures of informality, far from declining, have either remained stagnant or have actually increased. This includes countries such as India where economic growth has been at historically high levels. What exactly is informality and what are its magnitudes and trends? What are the causes of informality and why is it not decreasing as predicted by standard theories of development? What are the consequences for inclusive economic growth of a large and increasing informal sector? What are feasible and desirable policy responses to informality? These are the questions that motivate this broad based overview of informality. The questions will be addressed based on recent and ongoing research on India and globally.

Suggested Citation

Kanbur, Ravi, Informality: Causes, Consequences and Policy Responses (November 2017). Review of Development Economics, Vol. 21, Issue 4, pp. 939-961, 2017, Available at SSRN: or

Ravi Kanbur (Contact Author)

Cornell University ( email )

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Centre for Economic Policy Research (CEPR)

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