21, February, 2017
COMPARATIVE EVIDENCE PAPER

Rethinking the effect of informality on inclusive growth: lessons from Colombia and South Africa for their regions

This paper attempts to understand the nature of the impact that labour informality has on inclusive growth, by comparing the cases of Colombia and South Africa: two upper-middle income countries with very different views and government approaches to the issue.

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:

  1. Is labour informality positive or negative for inclusive growth, understood as growth accompanied by lower inequality?
  2. Is the answer to question 1 the same for all types of workers in a country?
  3. 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.

Authors:
Kezia Lilenstein
Morné Oosthuizen
Cristina Fernandez
Leonardo Villar
Juan Camilo Medellin
Francisco Fernandez

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