TY - JOUR
T1 - What Sustains Informality? A Study of the Interactions between Formal and Informal Sector Firms
AU - Mishra, Ajit
N1 - Funding Information:
I would like to thank Pranava Kadaliya for research assistance. I have also benefited from discussions with Ranjan Ray and Andrew Samuel. The paper has benefited from comments by two referees and participants at the Transforming Informal Work and Livelihoods Workshop, held in Helsinki 12–13 November 2020.
Publisher Copyright:
© 2022 UNU-WIDER. Published by Informa UK Limited, trading as Taylor & Francis Group.
PY - 2022/12/31
Y1 - 2022/12/31
N2 - This paper considers two vertical links between informal and formal sector firms and studies their implications. First, we model a situation where final products produced by the formal and informal sector firms are differentiated in terms of quality and consumption demand for the informal sector firm is related to the distribution of income. Less well-off consumers generate demand for the low-priced, low quality good produced by the informal sector. Our paper studies the implications of this link for the size of the informal sector. Second, we analyse a situation where, instead of competing with the formal sector firm, the informal sector firm produces an intermediate good for the other firm.
AB - This paper considers two vertical links between informal and formal sector firms and studies their implications. First, we model a situation where final products produced by the formal and informal sector firms are differentiated in terms of quality and consumption demand for the informal sector firm is related to the distribution of income. Less well-off consumers generate demand for the low-priced, low quality good produced by the informal sector. Our paper studies the implications of this link for the size of the informal sector. Second, we analyse a situation where, instead of competing with the formal sector firm, the informal sector firm produces an intermediate good for the other firm.
KW - Informal sector
KW - income distribution
KW - intermediate goods
KW - market size
KW - quality choice
UR - http://www.scopus.com/inward/record.url?scp=85131201914&partnerID=8YFLogxK
U2 - 10.1080/00220388.2022.2061853
DO - 10.1080/00220388.2022.2061853
M3 - Article
VL - 58
SP - 1403
EP - 1415
JO - The Journal of Development Studies
JF - The Journal of Development Studies
SN - 0022-0388
IS - 7
ER -