Review Article


DOI :10.26650/ISTJECON2020-828581   IUP :10.26650/ISTJECON2020-828581    Full Text (PDF)

The Importance of the Informal Economy for Social Policy

Sefa Karagöz

The informal economy is a multifaceted phenomenon with both economic and social consequences. It is important to better understand the informal economy in the context of social policy, as the informal sector is also associated with unemployment, income distribution, poverty, and migration. Thus, this study aims to draw conclusions about the relationship between the informal economy and outcomes in the primary areas of social policy. Accordingly, an evaluation was made in the context of unemployment, income distribution-poverty, migration, and informal employment, with the objective of revealing the relationship between the informal economy and social policy. The analysis of these relationships is based largely on empirical studies in the literature. It was found that the informal economy has both positive and negative consequences for unemployment, income distribution-poverty, and migration and that the informal economy must be considered in social policy planning so as to avoid deepening current social problems. 

JEL Classification : E24 , E26
DOI :10.26650/ISTJECON2020-828581   IUP :10.26650/ISTJECON2020-828581    Full Text (PDF)

Sosyal Politika Açısından Kayıt Dışı Ekonominin Önemi

Sefa Karagöz

Kayıt dışı ekonomi hem ekonomik hem de sosyal etkileri olan çok yönlü bir olgudur. Kayıt dışı ekonominin işsizlik, gelir dağılımı, yoksulluk ve göç ile ilişkili olması sosyal politika bağlamında bir inceleme yapılmasının önemini ortaya koymaktadır. Bu çalışma da buradan hareketle sosyal politikanın temel uğraş alanı olan konularla kayıt dışı ekonominin ilişkisi üzerinden bir çıkarım yapma amacı gütmektedir. Çalışmada sosyal politikanın temel uğraş alanlarından olan işsizlik, gelir dağılımı-yoksulluk, göç ve kayıt dışı istihdam bağlamında yapılan çeşitli ampirik çalışmalardan yararlanılarak sosyal politikalar yapılırken kayıt dışı ekonominin önemli olup olmadığı tartışılmıştır. Çalışmanın sonucunda ise kayıt dışı ekonominin işsizlik, gelir dağılımıyoksulluk ve göç ile olan ilişkisinde hem olumlu hem de olumsuz etkilerinin olduğu tespit edilmiş ve sosyal politikalar yapılırken mevcut sosyal sorunun daha da derinleşmemesi adına kayıt dışı ekonominin dikkate alınmasının gerekliliği vurgulanmıştır.

JEL Classification : E24 , E26

EXTENDED ABSTRACT


Although social policy is defined in various ways in the literature, it can be broadly identified as policies that address and seek to find solutions to the problems of society. Social policy is designed and implemented by multiple actors, the most powerful of which is the state. Some studies argue that the state is the primary actor in social policy and that other stakeholders are only complementary actors. From this point of view, it is possible to argue that the social policy-state relationship is generally shaped around the concept of the welfare state.

The informal economy began to attract attention globally starting in the 1960s and since then has been the subject of various studies. The informal economy has not only emerged for reasons that vary across countries, societies, and regions, but it also has both positive and negative consequences. The informal sector can affect state revenues due to its close ties with the formal economy, and its size is important for economic policies as well as other policies of the state.

Like all public policy, social policies are financed from the central government’s general budget. Thus taxes, which represent the largest source of income of the state, are key in terms of social policy. In turn, the size of the informal economy is directly or indirectly related to social policies.

This study examines the relationship between the informal economy and social policy, two leading subjects in the social science literature. The impact of the informal economy on social policy formulation was explored by considering various empirical studies on the informal economy in the context of the main areas of social policy including unemployment, income distribution-poverty, immigration, and unregistered employment.

Existing studies of the relationship between unemployment and the informal economy have revealed that the unofficial sector has both positive and negative consequences for unemployment. While the negative consequences generally emerge in terms of constraints on social rights, a decrease in unemployment rates in the short term can be considered a positive outcome. Some studies have concluded that this relationship is uncertain; however, in studies examining the relationship between income distribution and poverty with the informal economy, it is generally found that the informal economy negatively affects income distribution equality in the long-term and results in increased poverty levels. Studies on the relationship between immigration and the informal economy have concluded that the informal economy is both a cause and a result of immigration. In other words, the fact that immigrants tend to work in the informal sector, where jobs can be found more quickly to generate income or to adapt to a new city, is considered one of the primary drivers of the informal economy. Cross-border immigration of people to countries with more labor opportunities to find jobs in the informal sector is also one of the consequences of the informal economy. Unregistered employment, considered one of the most important fields of activity of the informal economy, is a reflection of the informal economy on labor markets.

It is clear that the informal economy has both positive and negative effects on the most fundamental areas of social policy. It is thus crucial to consider the dynamics of the informal social when developing social policies to avoid aggravating current social problems. Whether it is more beneficial to shrink the informal economy or to produce direct solutions to social problems may vary depending on the particular socio-economic conditions of each country.


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APA

Karagöz, S. (2020). The Importance of the Informal Economy for Social Policy. Istanbul Journal of Economics, 70(2), 479-505. https://doi.org/10.26650/ISTJECON2020-828581


AMA

Karagöz S. The Importance of the Informal Economy for Social Policy. Istanbul Journal of Economics. 2020;70(2):479-505. https://doi.org/10.26650/ISTJECON2020-828581


ABNT

Karagöz, S. The Importance of the Informal Economy for Social Policy. Istanbul Journal of Economics, [Publisher Location], v. 70, n. 2, p. 479-505, 2020.


Chicago: Author-Date Style

Karagöz, Sefa,. 2020. “The Importance of the Informal Economy for Social Policy.” Istanbul Journal of Economics 70, no. 2: 479-505. https://doi.org/10.26650/ISTJECON2020-828581


Chicago: Humanities Style

Karagöz, Sefa,. The Importance of the Informal Economy for Social Policy.” Istanbul Journal of Economics 70, no. 2 (May. 2021): 479-505. https://doi.org/10.26650/ISTJECON2020-828581


Harvard: Australian Style

Karagöz, S 2020, 'The Importance of the Informal Economy for Social Policy', Istanbul Journal of Economics, vol. 70, no. 2, pp. 479-505, viewed 15 May. 2021, https://doi.org/10.26650/ISTJECON2020-828581


Harvard: Author-Date Style

Karagöz, S. (2020) ‘The Importance of the Informal Economy for Social Policy’, Istanbul Journal of Economics, 70(2), pp. 479-505. https://doi.org/10.26650/ISTJECON2020-828581 (15 May. 2021).


MLA

Karagöz, Sefa,. The Importance of the Informal Economy for Social Policy.” Istanbul Journal of Economics, vol. 70, no. 2, 2020, pp. 479-505. [Database Container], https://doi.org/10.26650/ISTJECON2020-828581


Vancouver

Karagöz S. The Importance of the Informal Economy for Social Policy. Istanbul Journal of Economics [Internet]. 15 May. 2021 [cited 15 May. 2021];70(2):479-505. Available from: https://doi.org/10.26650/ISTJECON2020-828581 doi: 10.26650/ISTJECON2020-828581


ISNAD

Karagöz, Sefa. The Importance of the Informal Economy for Social Policy”. Istanbul Journal of Economics 70/2 (May. 2021): 479-505. https://doi.org/10.26650/ISTJECON2020-828581



TIMELINE


Submitted19.11.2020
Accepted03.12.2020
Published Online31.12.2020

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