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103 Yale L.J. 2289 (1993-1994)
The Informal Economy: Between New Developments and Old Regulations

handle is hein.journals/ylr103 and id is 2303 raw text is: The Informal Economy: Between New Developments and Old Regulations Saskia Sassent The growth of an informal economy in the large cities of highly developed countries prompts new questions about the relationship between economy and regulation today. As I shall employ the term, the informal economy refers to those income-generating activities occurring outside the state's regulatory framework that have analogs within that framework. The scope and character of the informal economy are defined by the very regulatory framework it evades. For this reason, the informal economy can only be understood in terms of its relationship to the formal economy-that is, regulated income-generating activity. The main theories of economic development-whether proffered by the modernization or the Marxist schools of thought-do not foresee the inevitable emergence of an informal economy in highly developed countries. Such theories do allow for criminal activities and underreporting of income in advanced economies; these activities do not signal the presence of any novel or unexplained economic dynamic. Income underreporting, for instance, is acknowledged as an inevitable response to the state's implementation of a tax system. Nevertheless, the main theories of economic development have yet to adequately explain the phenomenon of the informal economy in advanced capitalist (usually urban) societies. Until recently, theorization about the informal economy has focused on the shortcomings of less developed economies: their inability to attain full modernization, to stop excess migration to the cities, and to implement universal education and literacy programs.' The growth of an informal economy in highly developed countries has been explained as the result of immigration from the Third World and the replication here of survival strategies typical of the home countries of migrant workers. Related to this conception is the notion that backward sectors of the economy, such as the garment industry, remain backward (or even continue to exist) because a large supply of cheap immigrant labor is available. Both of these views imply that if there is an informal economy in highly developed countries, it is solely f Professor of Urban Planning, Columbia University. 1. See, e.g., W. ARTHUR LEWis, THE THEORY OF EcONOMic GROWTH (1955). 2289