Rethinking the effect of informality on inclusive growth: lessons from Colombia and South Africa for their regions
Colombia and South Africa are both upper-middle income countries where the debates surrounding informality in the two countries are very different. In South Africa, the informal sector is relatively small and is considered as an option for reducing unemployment and promoting inclusivity: national strategies are more open to the idea of promoting informality. In Colombia, on the other hand, informality is predominantly viewed as a major constraint on the growth of the formal sector and the national policy aims to reduce it.
These apparent differences led to the following three questions:
- Is labour informality positive or negative for inclusive growth, understood as growth accompanied by lower inequality?
- Is the answer to question 1 the same for all types of workers in a country?
- Are the policy recommendations to improve inclusive growth through informality the same for all types of workers?
This comparative evidence paper attempts to answer these three questions simultaneously.
Juan Camilo Medellin