Hidden Economic Development Assets

Abstract

The productive informal economy is often ignored as an economic development asset because it is difficult to measure. This article examines the case for including the informal sector in urban development strategies. Size estimates suggest that the informal sector is large and growing more rapidly than GNP Therefore, it is substantial enough to warrant a role in economic development planning. Several factors, including lower opportunity costs of participation, circumvention of means tests, a dense set of social and institutional relationships, and demographic composition contribute to generating a more active informal economy in central cities. Policy options are suggested to capitalize on the productive informal economy, including more careful monitoring, supplementing the social safety net, strengthening the role of training, and encouraging entrepreneurship and job development.