Informal Economy

by

Nana-Yaw Andoh, Martin J. Murray

• LAST REVIEWED: 05 April 2024
• LAST MODIFIED: 20 August 2024
• DOI: 10.1093/obo/9780199846733-0128

Introduction

Generally speaking, the term “informality” refers to practices that take place outside official regulation and formal state sanction. Urban informality—especially in the spheres of housing and work—has long served as a touchstone in debates in urban studies and has long been a focal point in scholarly research about livelihoods and income generation, poverty, social exclusion and marginalization, land rights, and self-provisioned shelter. Despite its indispensability for understanding how those without formal employment “get by” in urban settings, how urban dwellers “house themselves,” and how governance systems evolve outside of state regulation, informality remains a notoriously slippery term that defies simple classification. Until recently, conventional scholarly research and writing primarily structured debates on formality and informality along the dichotomous divisions between regular/irregular, regulated/unregulated, visible/invisible, or legal/illegal distinctions, where state regulation and the law defined what was formal, and everything outside of this terrain constituted “informality.” Yet in the early twenty-first century, a growing number of scholars have challenged this conventional conception of informality and formality as opposing or even mutually exclusive domains of social practice. These scholars have suggested that formality and informality should be understood as markers along a continuum rather than polar opposite end-points.

Expanding the Conceptual Terrain

As a general rule, mainstream scholarship has typically looked at informality through the lens of finding shelter or as a mode of income generation. In thinking about informal accommodation, scholars have drawn attention to self-built, makeshift housing outside official sanction and regulation. Concepts and categories include informal settlements, squatter encampments, and irregular housing. Correlatively, scholars have employed various labels to describe informal economic activities: the shadow economy, the irregular economy, the subterranean economy, the underground economy, and the black economy. The term “informality” has also been associated with hidden, invisible, submerged, non-official, unrecorded, and clandestine economic activities. New scholarship has sought to move beyond the formal/informal dichotomy and to find new ways to understand how formal and informal practices are interconnected (Streule, et al. 2020). A great deal of recent scholarship within urban studies has sought to unsettle the dichotomous separations between the formal and informal. In specific, scholars have focused particular attention on planning and governance regimes, housing, land rights, and property titling (Banks, et al. 2019; Boudreau and Davis 2017; Lombard and Huxley 2011; McFarlane 2012; Porter 2011; AlSayyad and Roy 2004; and van Gelder 2013). Rather than relying on stark distinctions between these categories, recent research and writing have stressed instead their interconnected and relational qualities of formality and informality (Boudreau and Davis 2017; Lemanski 2009). Scholars have also interrogated the varying political-legal-spatial responses of state authorities to unauthorized housing settlements, including evictions, upgrading, and formal legalization (McFarlane 2012; Porter 2011; Roy 2009; van Gelder 2013). In exploring urban governance regimes, Koster 2019, cited under Stretching and Bending the Concept, found that governance assemblages always comprise formal and informal elements. An expanding number of scholars have begun to address the question of informality as a key component of urban governance and land use. In rejecting the dichotomy of formal and informal, they argue instead that informality is always intertwined and imbricated with formality (AlSayyad 2004; AlSayyad and Roy 2004; Roy 2005; Roy 2009; Yiftachel 2009a; Koster and Nuijten 2016; McFarlane and Waibel 2012; Harris 2018; Koster and Smart 2019; Meth 2020). Framed in this way, economic transactions, patterns of human settlement, and governance regimes are never structured just along formal institutional lines but are also constituted through negotiated trade-offs and extralegal mediations (Hernández, et al. 2010, cited under General Overviews; McFarlane 2012; Roy 2005).

• AlSayyad, Nesar. “Urban Informality as a ‘New’ Way of Life.” In Urban Informality: Transnational Perspectives from the Middle East, Latin America, and South Asia. Edited by Ananya Roy and Nesar AlSayyad, 7–30. Lanham, MD: Lexington Books, 2004.

  This introduction to an impressive collection of essays takes its departure from the Chicago and LA Schools of urban studies to argue for an understanding of informality as a regular part of urbanization in most of the world’s cities. The author contends that informality has become the predominant mode of securing income in cities around the world.

• AlSayyad, Nesar, and Ananya Roy. “Urban Informality: Crossing Borders.” In Urban Informality: Transnational Perspectives from the Middle East, Latin America, and South Asia. Edited by Ananya Roy and Nesar AlSayyad, 1–6. Lanham, MD: Lexington Books, 2004.

  AlSayyad and Roy put forward the provocative proposition: if formality operates through the fixing of value, then informality operates through the constant negotiability of value. They argue further that this negotiability of value is embedded in city-building efforts everywhere.

• Banks, Nicola, Melanie Lombard, and Diana Mitlin. “Urban Informality as a Site of Critical Analysis.” Journal of Development Studies 56.2 (2019): 223–238.

  DOI: 10.1080/00220388.2019.1577384

  The authors suggest that reconsidering informality as a site of critical analysis helps us to understand processes of stratification and disadvantage.

• Boudreau, Julie-Ann, and Diane Davis. “Introduction: A Processual Approach to Informalization.” Current Sociology Monograph 65.2 (2017): 151–166.

  DOI: 10.1177/0011392116657286

  The authors identify the importance of recognizing uneven processes of informalization, inquiring about whether and how informal and formal practices can help us to reconceptualize modern concepts such as citizenship, universal access to basic infrastructure, organized resistance, and even the state apparatus itself.

• Harris, Richard. “Modes of Informal Urban Development: A Global Phenomenon.” Journal of Planning Literature 33.3 (August 2018): 267–286.

  DOI: 10.1177/0885412217737340

  Harris traces how informality takes many forms and exists everywhere. The article looks at the distinction between formal and informal as particular forms of practice related to territory, groups, and governance.

• Koster, Martijn, and Monique Nuijten. “Coproducing Urban Space: Rethinking the Formal/Informal Dichotomy.” Singapore Journal of Tropical Geography 37.3 (September 2016): 282–294.

  DOI: 10.1111/sjtg.12160

  The authors suggest that residents of marginalized urban areas are inventive navigators who explore their changing physical, spatial, and sociopolitical environments, looking for opportunities to implant themselves in urban space while avoiding threats of exclusion.

• Koster, Martijn, and Alan Smart. “Performing In/formality beyond the Dichotomy: An Introduction.” Anthropologica 61.1 (2019): 20–24.

  DOI: 10.3138/anth.2018-0013

  The authors argue that domains of formal regulation always contain elements of informal practices.

• Lemanski, Charlotte. “Augmented Informality: South Africa’s Backyard Dwellings as a By-product of Formal Housing Policies.” Habitat International 33.4 (2009): 472–484.

  DOI: 10.1016/j.habitatint.2009.03.002

  Historically, backyard dwellings have been overlooked by housing policies that focus on upgrading or demolishing informal settlements. Lemanski revisits the conundrum of backyard housing in post-apartheid South Africa, suggesting that cash-poor homeowners are dependent on income from the rent of backyard dwellers, thereby upending the conventional understanding of the power pendulum between (owning) landlords and (renting) tenants.

• Lombard, Melanie, and Margo Huxley. “Self-Made Cities: Ordinary Informality?” Planning Theory and Practice 12.1 (2011): 120–125.

  In examining the United Nations Economic Commission for Europe (UNECE), Self-Made Cities: In Search of Sustainable Solutions for Informal Settlements, Lombard and Huxley identify policy responses in the report that are designed to address the challenge of informal settlements, with a particular focus on the role of state provision of housing, land management, and urban planning.

• McFarlane, Colin, and Michael Waibel. “Introduction: The Informal-Formal Divide in Context.” In Urban Informalities: Reflections on the Formal and Informal. Edited by Colin McFarlane and Michael Waibel, 1–12. London: Routledge, 2012.

  In this introduction to a collection of essays, McFarlane and Waibel distinguish four ways the formal-informal divide has framed debates in development and urban studies.

• McFarlane, Colin. “Rethinking Informality: Politics, Crisis, and the City.” Planning Theory & Practice 13.1 (March 2012): 89–108.

  DOI: 10.1080/14649357.2012.649951

  Rather than restricting our understanding of informality to the narrow fields of territorial formation (i.e., spaces for living) or as a labor categorization (i.e., means of income generation), McFarlane proposes an alternative conceptualization that conceives informality and formality as intertwined forms of practice that include contestation over governance, property, and use of space.

• Meth, Paula. “Marginalised-formalisation: An Analysis of the In/formal Binary through Shifting Policy and Everyday Experiences of ‘Poor’ Housing in South Africa.” International Development Planning Review 42.2 (April 2020): 139–164.

  DOI: 10.3828/idpr.2019.26

  Using examples drawn from urban South Africa, Meth introduces the concept of marginalised formalisation to make sense of both the shortcomings that residents living in formal housing experience in their everyday lives and also the misrepresentation of housing policy and government rhetoric regarding the alleged benefits of formalized housing.

• Porter, Libby. “Informality, the Commons and the Paradoxes for Planning: Concepts and Debates for Informality and Planning.” Planning Theory and Practice 12.1 (2011): 115–120.

  DOI: 10.1080/14649357.2011.545626

  Porter addresses challenges for urban planning under conditions of clouded property rights.

• Roy, Ananya. “Urban Informality: Toward an Epistemology of Planning.” Journal of the American Planning Association 71.2 (June 2005): 147–158.

  DOI: 10.1080/01944360508976689

  In arguing that informality has become a generalized mode of urbanization, Roy identifies the challenges for urban planners in dealing with the “unplannable,” that is, exceptions to the orderliness of formal urbanization.

• Roy, Ananya. “Why India Cannot Plan its Cities: Informality, Insurgence, and the Idiom of Urbanization.” Planning Theory 8.1 (February 2009): 76–87.

  DOI: 10.1177/1473095208099299

  While informality is typically regarded as synonymous with poverty, Roy makes the case that India’s urban planning regimes in India are themselves informalized, that is, they regularly operate within a state of deregulation, ambiguity, and exception.

• Streule, Monika, Ozan Karaman, Lindsay Sawyer, and Christian Schmid. “Popular Urbanization: Conceptualizing Urbanization Processes beyond Informality.” International Journal of Urban and Regional Research 44.4 (2020): 652–672.

  DOI: 10.1111/1468-2427.12872

  The authors introduce the concept of popular urbanization to describe a specific urbanization process based on collective initiatives, self-organization, and the deliberative activities of inhabitants. They suggest that popular urbanization is a bottom-up urban strategy through which the inhabitants produce, transform, and appropriate an urban territory, largely outside the framework of the market and state regulation.

• Yiftachel, Oren. “Theoretical Notes on ‘Gray Cities’: The Coming of Urban Apartheid?” Planning Theory 8.1 (February 2009a): 88–100.

  DOI: 10.1177/1473095208099300

  Yiftachel argues that urban informality exists in a conceptualized “gray space,” positioned between the “whiteness” of legality/approval/safety and the “blackness” of eviction/destruction/death.