Informality in space. Understanding the role of the urban informal economy in developing countries

PhD ceremony: Ms. A.I. Moreno Monroy, 14.30 uur, Academiegebouw, Broerstraat 5, Groningen

Dissertation: Informality in space. Understanding the role of the urban informal economy in developing countries

Promotor(s): prof. S. Brakman, prof. J.H. Garretsen

Faculty: Economics and Business

Whereas the developing world is becoming urbanized at a very rapid pace, cities can only offer a limited number of well remunerated, stable, secure, legally recognized and protected jobs in enterprises that are part of the ‘formal’ economy. Many of those not employed in the formal economy, voluntarily or not, become part of the urban ‘informal’ economy. In rapidly urbanizing developing countries, the urban informal economy explains a considerable share of employment and output. This thesis contains theoretical and empirical studies on the nature, role and dynamics of the urban informal economy.

Among the key findings are that informal enterprises’ ability to generate and benefit from urban agglomeration economies critically depends on their effective access to resources and markets. The empirical study for the city of Cali, Colombia reveals that small formal and informal manufacturing enterprises do not necessarily cluster with the same intensity or in the same spaces within a city. Nevertheless, as the first theoretical study on the thesis shows, the presence of a competitive informal manufacturing sector has consequences on the development and location of large scale manufacturing within countries. On the other hand, according to the empirical study for India, formal-informal sector linkages through subcontracting do not promote or hamper the overall modernization of the informal manufacturing sector. Finally, according to the second theoretical study on the thesis, the effect of social influence on urbanization rates and the size of the urban informal economy can be as important as the effect of rural-urban income differentials.