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LCS-EC202 The Informal Economy and Development: Drag on Development or Engine of Growth?

Dr Kate Meagher, Associate Professor, Department of International Development, London School of Economics and Political Science

Dr Marlese von Broembsen, Senior Lecturer, Faculty of Law, University of Cape Town

Course outline

Recent upheavals in the global economy have triggered a rethinking of the informal economy in development policy and practice. Informal economies now account for between one-third and one-half of GDP in developing countries, and employ between one-half and three-quarters of the non-agricultural labour force. Development statisticians, practitioners and planners are now scrambling to understand, to measure and even to incorporate informal economies, after decades of treating them as residuals and signs of backwardness.

This course will examine the changing role of the informal economy in contemporary development process and policy. Since the turn of the millennium, informal economic practices and institutions have been viewed less as problems than as mechanisms for dealing with widespread market failures. The informal economy has become a central element in new policy thinking about poverty and employment, urban service provision, gender empowerment, social policy, and state-society relations. In a globalizing world, does the informal economy foster or weaken economic growth? Do informal economies have different effects in different regional and economic contexts? Does a better understanding of informal economic institutions hold the key to making markets work for the poor?

The objective of this course is to familiarize students with the complex economic processes taking place outside the formal boundaries of state regulation. We will focus on the changing theoretical, empirical and policy dimensions of the informal economy, drawing on statistics and case studies from Africa, Asia, the Middle East, and Latin America. The course will introduce the key statistical and theoretical advances in the study of informality and development before turning to a range of contemporary issues, including informality and global value chains, informality and the law, urban informalization, social enterprise and the bottom of the pyramid, and informal politics and collective bargaining. The course will use a comparative institutional approach, focusing attention on the divergent trajectories of informal economies and their differential effects on state capacity, regional dynamics, global integration and economic development in different developing countries and regions. Empirical trends and case studies will be used to illustrate, and to challenge, contemporary perspectives on the role of the informal economy in development.

Full course outline

About the instructors


Dr Kate Meagher is Associate Professor in the International Development department at the London School of Economics and Political Science (LSE) and has expertise in the informal economy and non-state governance in Africa. She has carried out extensive empirical and theoretical research on cross-border trading systems and regional integration, the urban informal sector, rural non-farm activities, small-enterprise clusters, and informal enterprise associations, and has engaged in fieldwork in Nigeria, Uganda, and the Democratic Republic of the Congo. 

Her research focuses on the changing character of the informal economy in contemporary Africa, and the implications of economic informalization for development, democratization and globalization. Degrees from the University of Toronto; the Institute of Development Studies at the University of Sussex, and a D.Phil in Sociology from Oxford have been interspersed with lecturing and research positions at IAR/Ahmadu Bello University in Zaria, Nigeria and at the African Studies Centre, University of Oxford.


Dr Marlese von Broembsen is a senior lecturer in the Faculty of Law, University of Cape Town. She is a trained lawyer and holds a Master’s in Development Studies.

Her work focuses on the nexus between poverty, informality, law and development. This draws on four years spent working with black-owned informal businesses in townships near Cape Town, as well as many years of policy work for international aid agencies, South African agencies (such as Wesgro, TIPS and the Taylor Commission), the UCT Graduate School of Business, and government. Marlese’s particular interest is in labour market institutions that potentially facilitate the unemployed poor and informal producers participating in global value chains.