29 March 2014

Urban Informal Sector Concepts, Indian Evidence and Policy Implications

Urban Informal Sector
Concepts, Indian Evidence and Policy Implications
Despite the failure of the 'modern' sector to absorb labour supplies from the rural areas, large-scale unemployment has not been rampant in the metropolitan centres, as would be predicted by competitive models. The surplus labour unable to gain entry into the 'modern' sector has been generally found to be absorbed by the rest of the urban economy which has been loosely termed as the informal sector It is only in the last decade that this sector has become a focus of research in the area of urban labour markets.
This paper attempts to trace the conceptual developments in this emerging area of concern and to identify the different policy implications as well as the issues for further research.
RESEARCH efforts in urban employment and urban labour markets in the past have most often focused on the organised sector with an emphasis on industrial employment. However, it is obvious that a large share of the benefits from the growth of this sector have accrued to a small and exclusive growth of people. The different socio-economic groups within an urban area have generally shared in highly unequal proportions. A large section of the urban poor are generally completely excluded from this sector and its benefits.
Any attempt to identify relevant anti-poverty policies, will have to be based upon an understanding of the nature of existing economic opportunities and the associated labour market processes. In the past, the urban growth in India has largely been due to migration from rural areas. It has also been agreed upon by most researches that the major motivation behind such migration has been economic in nature. The initial spun to migration may have come from the 'modern' sector in manufacturing, administrative and commercial establishments. However the output growth of this sector especially in manufacturing, due to its capital intensive nature, has failed to promote a proportionate growth in labour demand. Initial models, based on competitive markets and distinguishing two sectors have failed to explain these developments (Lewis, 1954, Fei and Ranis, 1961). The 'push' factors operating in the rural areas were strong enough to send large supplies of labour to urban areas. This has been attempted to be explained by life-time earnings and 'expected income' of the potential migrants (Todaro, 1969; Harriss and Todaro, 1970). However, despite the failure of the 'Modern' sector to absorb these labour supplies, large scale unemployment has not been rampant in the metropolitan centres as would be predicted by competitive models. The so-called surplus labour unable to gain entry in the formal (modern) sector was generally found to be absorbed by the rest
of the urban economy which has been loosely termed as the informal sector. It is only in the last decade that this has become a focus of research in the area of urban labour markets.
The present paper attempts to trace the conceptual developments in this emerging area of concern. The different policy implications on the basis of this and the issues for further research are also identified.
The theoretical basis of the concept assumes some dichotomy in the urban economy arising out of the dualistic tendencies. The models of sectoral dualism were put forth first by Lewis (1954) and Fei and Ranis (1961, 1964). In their formulations, the modern capitalist sector is the dynamic one whose growth is brought about by output expansion and re-investment of profits. The supply of labour to the modern sector from the surplus in the traditional sector is assumed to be unlimited at constant real wages. The urban extention of the traditional sector lends a dichotomous character to the urban economy.
The term informal sector to suggest such a dichotomy was first used by Hart (1971). During his field work among the urban workers in Ghana, he came across a large self-employed sector which provided means of livelihood for new entrants to the urban labour force who were unable to obtain employment in the formal sector. He then questioned the traditional attitudes of treating this sector as being highly unproductive and constituting surplus labour. It was exactly this attitude which had relegated the whole range of activities likely to fall in this sector to complete neglect both in terms of urban research and policies.
For more practical purposes, the concept was started gaining currency after its wide usage in a number of country and city studies, carried out under the auspices of ILO World Employment Programme. In the early sixties, it was recognised that the assumed trickle down effects under
the accelerated growth policy were not operating, at least not quickly enough. This led to a search for alternative solutions. One such attempt came through the ILO country missions in Kenya, Colum-bia, Sri Lanka and Philippines, as well as several city studies. (ILO, 1970, 1971, 1972, 1976a; Joshi et al, 1980; Lubell, 1974; Sethuraman, 1976a, etc). The major achievement of the country missions was to shift the emphasis from a development strategy based mainly on economic growth whereby employment was obtained as a residual to a strategy which focused on employment as a prime objective.
Most of the ILO's country studies found a variety of structural imbalances as being the basis of unemployment/ under-employment. One of these imbalances, particularly relevant to urban areas, was assumed to be caused by the discriminatory treatment of, or the lack of support for, the informal as against the formal sector. These studies have tended to view this sector in a more positive light. They recognised their potential and productive role, 'especially in terms of generating employment and distribution of income. The nature of policies thus advocated related to measures like, "ceasing the demolition of informal sector housing, reviewing trade and commercial licensing procedures, and intensifying technical research and development work on products suitable for production or use in the informal sector" (Moser, 1977).
Borrowing the same model of the country studies, the city studies also laid emphasis on the productive role of this sector to generate growth and redistribution. The city studies did go beyond this generalisation to trace its local applications. For example, the Calcutta study found that industrial and occupational patterns were closely correlated with the geographical and linguistic origins of the working population. A consequence of particular patterns of migration was seen as the development of a highly fragmented urban labour market with a particular type of ethnic labour force participation (Lubell, 1974).
Economic and Political Weekly
Vol XX, No 8, February 23, 1985
February 23, 1985
In effect, the approach of country studies and city studies may be termed as a target group approach focusing on the informal sector in terms of activities and workers. The major criticism of this approach has been the failure of the projects to operationalise their earlier contention that "the employment problem could not be seen in isolation. Its position at the centre of the whole development process meant that the employment strategies could only be made sensible within an overall development strategy" (Moser, 1977, p 30). Thus their recommendations have also been criticised for the failure to consider their position within the total economic structure.
The informal sector has its theoretical
basis in dualistic concepts and has been used as a policy tool by ILO's target group approach. Despite the probably valid criticisms of ILO's policy measures, their emphasis on informal sector has had a positive influence in shifting research emphasis to the whole gamut of complex activities from which a large section of the urban population literally derives its daily bread. It is being recognised that research in urban employment and economy is not confined to the modern manufacturing sector alone. We turn to a review of such studies, some .with only theoretical explorations and others based on empirical research which have viewd the informal sector in a variety of ways. These different conceptualisations of the informal sector
have tended to come up mainly because of the lack of a clear theoretical basis for the concept as well as the wide spectrum of economic activities that it covers. These often originate in different contexts and are carried out under very different social relations or production.
The increase in research focusing on the urban informal sector in developing countries has simultaneously led to a greater vagueness and inconsistency of definition. Obviously, the major reason behind this state of affairs is the lack of a "clear empirical basis" for the concept. The term has been used alternatively to refer to the
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enterprises and their characteristics, or used as being synonymous with the urban poor, or at other times to refer to the labour market. However, it is clearly important to distinguish whether it is the activities or the people that are being classified.
Keith Hart (1975) based his dual model on one simple characteristic, namely the distinction between income opportunities in wage and self-employment. Employment in the formal sector was correlated with wage employment while that in the informal sector with self-employment. The ILO Reports, enumerated detailed and specific characteristics of the informal sector to clearly identify the target groups. These were: i) ease of entry; ii) reliance of indigenous source of
inputs; iii) family ownership of enterprise; iv) small scale of operation, and low
productivity; v) labour intensive and adapted
technology; vi) skills acquired outside the formal
school system; vii) unregulated and competitive
markets; and viii) lack of support and recognition
from the government. Very clearly, the ILO emphasis has been on enterprises supposed to be in the informal sector. However, these particular ILO characteristics have been questioned in two ways. Firstly, there are questions regarding their relevance, especially raised by those who have attempted field work explorations. Particularly strong criticism comes forth from Peattie (1980) and Breman (1976, 1977). Based on her work in Bogota, Columbia, Peattie questioned the assumptions regarding ease of entry, unregulated and competitive markets and the unorganised nature of activities. She found that "a lot of organisation exists, and possibilities for new entry arc highly differentiated". In her works, "what seems to characterise these occupations designated as the informal sector, is, therefore, not so much a lack of formal structure, but a diversity and complexity of structure'' (p 24). Both Breman and Peattie attribute the prevalence of particularistic arrangements as being the basis for gaining entry. After describing; in detail, the ways of getting work in the informal sector in Valsad, a district in South Gujarat, Breman (1977) concluded that "the decisive factor in getting employment... is personal contact. The nature and extent of the network of contacts determines not only whether one is incorporated into the work process but
also, where, how; for how long, and for what type of work." The second category of criticism comes in terms of comparability of these different criteria as the distinction based on one criterion does not run parallel to that based on another criterion. Also, different criteria give different boundaries which are not confined to one sector. Thus, these different criteria "do not cumulate in a clear and consistent stratification" (Breman, 1976, p 1906).
A different view put forth by Weeks (1975) stressed the factors which were external to the characteristics of the enterprise. He laid down specific emphasis on the role of the state and based his two sector distinctions on, "the organisational characteristics of exchange relationships and the position of economic activity vis-u-vis the state" (Weeks, 1.975, p 2). Weeks claimed that the formal sector's growth was itself fostered by government measures like tariff and quota protection for import substitution industries, import tax rebates on capital and intermediate goods, tax holidays, low interest rates, selective monetary controls and licensing measures. which protected the formal sector. He however maintained that this did not make the informal sector static in any sense. All the sectors were considered dynamic in the sense that they were continually adapting to external changes. "The significant question was to identify the structural conditions under which dynamic change was "involutionary or evolutionary in nature"(Moser, 1977, p 38). Involutionary development reflected a static or slowly growing output per head and capital accumulation and evolutionary, where these were rapid. He found that a dynamic and evolving informal sector was beneficial in many ways. Further, he implicitly assumed that the linkages between the two sectors were benign and therefore needed to be promoted further.
On the whole, these characteristics, used to define or understand the informal sector may be grouped into three categories as follows:
(i) Those related to the characteristics of the enterprise, like size, family ownership, source of inputs, labour intensive technology, etc. In this category, the emphasis is on the context within which people work, the stress being placed on the mode of production.
(ii) Those related to the nature of exchange relationship with the state and the rest of the urban economy like unregulated and competitive markets, lack of support and recognition from the government, lack of organisation.
unregistered nature of enterprises, etc (iii) Those based on the employment situation, Or labour market processes like case of entry, self-employed or casual nature of work, lack of a formal contractual arrangement for employment, etc. Many of the studies in India have used some of these criteria for empirical delineations of the two (or more) sectors, (Joshi and Joshi, 1976; Breman, 1977; Papola, 1978; Bose, 1978; Deshpande, 1979; ORG, 1980 a; Harriss, 1981; and Ma-jumdar, 1980). All of these studies have in some way or the other attempted to identify the informal sector for the city as a whole and estimated the proportion of work force in this sector. The Table illustrates the variety of estimates, criteria used and the relevant data base.
On the whole, it appears that the size of the informal sector in terms of employment ranges from a minimum of 45 per cent to a maximum of 75 per cent. The variation, to some extent, may be attributed to the difference in criteria used for defining the informal sector. Firstly, most of them have the criteria of size of the establishments as a distinguishing characteristic. The cut off point actually adopted has ranged from five (Bose, 1978) to twenty-five (Joshi and Joshi, 1976). The second aspect generally considered is the self-employed nature of work. As done by Papola (1978), all independent workers were considered to be a part of the informal sector. This has been questioned by Breman (1976), who rightly points out that it is probably incorrect to include one man professional firm or owners of small workshops along with the so-called self-employed such as the street barber, shoe shiner or garbage collector. The third criteria often used is the casual status of the worker. In effect, these are treated as "one-man firms in the sense of small entrepreneurs". Here the emphasis is on distinguishing employment by the nature of contract as casual or regular. "Workers in casusal employment may work with the same amount of capital (elasticity of demand), produce the same goods, and be employed in establishments of the same size (scale of operation) and yet not receive the same wage for earnings) as the regular workers do" (Deshpande. 1979. p 253).
In talking of the characteristics of the informal sector in this manner, two important considerations are generally neglected. These refer first to the nature of its growth and its relationship to the rest of the urban economy and secondly to the differentiations within the so-called informal sector itself. We take up these
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two issues in greater detail in the next two sub-sections.
In sharp contrast to the theoretical formulations put forth by Weeks (1973) and the ILO stand on the potential for growth of the independent informal sector, many of the field studies have stressed the 'exploitative' relationship and the largely in-volutionary growth of this sector. The proponents of this view take a pessimistic view of the ILO and Weeks' policy measures. They tend to generally question the validity of economic change without political change. This view, has however, been criticised sharply by King; that 'intellectuals have discovered the plight of the working poor, only to decide rather rapidly that unfortunately nothing can be done about it". (King, 1974, p 10).
It would be worthwhile to identify the nature of linkages between the formal and informal sector or amongst the different economic activities in the urban economy. These may at the very basic level be classified into direct and indirect. The direct linkages may be in terms of resource inputs from formal to informal sectors or technology and market linkages, (Bose, 1978; Scott 1979). These may include "direct incorporation through subcontracting and outworkers as well as more complicated procedures such as the utilisation in retail distribution of 'agents' who put up their own deposits thereby relieving the mother company of many of the risks involved" (Moser, 1977). The indirect linkages refer to the demand for goods and services generated in the informal sector by a clientele whose income is dependent upon the formal sector.
Many of the field studies have identified the nature of these relationships. Bienefeld (1975) starts his paper based on his research in Tanzania with a 'tenative framework which assumes that:
many small scale operators are engaged in a process of production and of technological development but that their ability to develop cumulatively over extended periods is limited by their being exploited through the terms of trade; by their dependence on large scale industry for inputs (often illegally obtained); and by the fact that when the markets they serve grow beyond a certain size this will not be a gradual but accelerating stimulus to further will-not-be-a-gradual development of the forces of production. Instead it will trigger a discontinuous shift to international technology which will incorporate this market by virtue of its efficiency and/or its market power the latter based on effectively
unlimited access to capital and on the establishment of brand name products through heavy advertising (Bienefeld, 1975, P 56).
Bienefeld thus places great stress on the exploitative character of these linkages and attributes this reason for the relatively involutional character of this sector.
Bose (1978a) in a similar fashion identifies the exploitative character of linkages in the urban economy of Calcutta. According to Bose, the informal sector enterprises perform two basic funtions. First, they produce cheap goods for rural and urban poor, "who are finding it increasingly difficult to purchase high cost, standard industrial goods''. This is based on the low wages in this sector. The second function, also based on the same reason, is to provide the larger units with huge trading profits through an unequal exchange relationshp. Thus the poor in the informal sector operate in a separate market both for resource inputs and outputs, which is highly unfavourable to them, the gains being appropriated by the large sector. This is similar to Week's formulations, except that Bose maintains that the different markets are purposeful and directly profitable for large sector operations and cannot be changed without a radical restructuring of the total economy. Other research, including Bose's also shows that official programmes which aim at stimulating industry in the informal sector are of little practical use. "Neither can increased aid by the state be expected as long as the political system is dominated by interests which are linked to the formal sector. The paradox of the situation is that the recommended policy changes will inevitably be detrimental to an elite which is responsible for its execution" (Breman, 1976, p 1874).
After looking at the structure of economic activity, in the informal sector Papola (1972) concluded that though the informal sector provided "a significant part of the goods and services in the urban economy and provided employment to practically the entire residual labour force", its growth depends on the fortunes of the formal sector. However, he did not look further into whether the linkages between the two sectors were basically exploitative or benign in character. He did distinctly identify the informal manufacturing activities which are linked up vertically to the formal sector through market and technology linkages as the ones which promised better productivity and earnings.
Based on her anthropological field explorations of small enterprises in Bogota, Colombia Peattie (1980) found that these
enterprises served two distinct categories of clientele. Firstly, as Bose (1978) has found in Calcutta these enterprises were "producing an inferior and cheaper product in a way which makes it accessible to persons who can neither buy in large quantities nor transport for long distances". The other type serves ua small and individualised market (as in custom-made furniture and shoes) or where a great deal of flexibility in marketing is advantageous (as in street vending and illegal occupations)". At other times, these same enterprises were functioning as ''distribution outlets or component suppliers for very large firms". They however face the price and credit problems much more than the large sector. On the whole this work, as others referred above, points to the preponderance of a variety of direct linages. The two sectors are neither exclusive circuits, nor distinct compartments. Strong backward and forward linkages are quite typical, which are often-through very complex arrangements and extremely unfavourable to the smaller enterprises.
ORG (1980b) in their study of informal sector in Madras, also looked at the backward and forward linkages for informal enterprises in manufacturing, trading and service activities. They found that it was more in terms of resource inputs that a variety of linkages with large dealers were common. However, the activities on the whole were more individual customer oriented. Only the craft-based items, there were some links with other dealers. They also studied the units which were assisted by banks financially. The major difference in these was in terms of a larger share of backward linkages lying with the more organised sectors. Surprisingly, despite the larger size, easy credit, good returns on capital and such advantages, the net income was still relatively low. It should have been interesting to see to what extent the linkages here are benign or exploitative and therefore result in the low income earning potentials.
Besides these types of direct linkages in terms of market, technology and resource inputs, there exist social dependency relationships which have their basis in the lack of economic security. A complete lack of public welfare or unemployment compensation, coupled with a highly irregular and insecure nature of income, forces these people into either social dependency relationships or petty entrepreneurships. Breman's work in South Gujarat vividly illustrates these. He points out that, "it should be realised that the poor try to in-
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crease their security within the urban system by entering into dependency relations with social superiors, and in doing so they accept a wide range of contractual and semi-contractual commitments". (Breman, 1976, p 1906). Similarly, Peattie (1980) found people resorting to petty en-trepreneurship for similar purposes.
The indirect linkages refer to those generated by the goods and services produced in the informal sector for a clientele whose income is dependent upon the formal sector. The building and furnishing of middle class houses, repair services, traders of fresh vegetables, fruits, etc, and of course the well-known domestic servants; all these activities are dependent upon the income of a clientele who in turn is dependent upon formal sector activities for their livelihood. Thus, only a growth in the formal sector's productivity and wages will create additional demand for these activities. However, here a paradoxical relationship arising out of the demonstration effect of formal sector goods is likely to arise between the informal sector production and formal sector wages. This growth would worsen the income distribution and induce a shift in the pattern of demand away from the informal sector's products.
Thus one can confidently conclude that the informal sector is in no way an independent and exclusive circuit. It is linked to the formal sector and the rest of the economy through a variety of linkages. The possibility of growth of the informal sector then depends on the nature and types of linkages that are operating in reality. Although a few studies have branded these as exploitative, we feel the issue is still open and certainly there is need for further research to identify not only the linkages of technology and market but also the wide variety of social relations of production which comprise the different modes of production.
One of the other major criticisms of the informal sector or such dualistic concepts is that it fails to distinguish the internal differentiations. In the words of Sinclair (1978, p 244):
the informal secior tradition in development (and research) work has tended to obscure the difference (between the units and workers) which comprise that mass. By lumping together the individuals, families and enterprises, which one intuitively believes to constitute that sector, one effectively precludes analysis of its growth prospects while at the same time impeding investigation
of its diverse parts. These type of doubts have been raised by many researchers and policy planners, (Breman, 1976, ILO 1976; Papola, 1978; Peattie, 1980).
ILO's (1976b) work on Sudan emphasised the informal sector as a "heterogeneous, multidimensional or multi-layered phenomenon". It distinguished four sub-groups which were analysed separately to conclude, the picture that emerges for the informal sector in Sudan is that of heterogeneous and complex activities. At its most advanced level where the majority of establishments exist, we have the multitude of small manufacturing, service and commercial establishments employing a large number of people who are making a reasonable living and who are there to stay. Finally, we have the traditional petty vendors who are in transition to and from formal sector jobs (ILO, 1976a, p 315). Breman (1976), however, refutes this possibility based on his work in a district town in South Gujarat. He points out that although it is easy to find the categories at the extremes of the two poles of the labour force, within these two extremes there are gradations', and not 'watertight compartments'. He does not entertain the notion of a pluralist labour market either, in which there are a great many separate and identifiable sub-markets. He claims that the tendency to partition off a sector does not mean closed circuits. This is seen as an attempt to monopolise certain occupational roles or activities for social equals in a situation of extreme scarcity (p 1905). Secondly, for the poor "work is not the basis of a more or less independent existence but the outcome of a comprehensive dependency relationship. In such circumstances, labour is fluid in character, without any question of differentiated and mutually exclusive sub-markets". Lastly, he points out that "the variety of criteria used for identifying the two sectors do not run parallel to cumulate in a clear and consistent stratification". Breman then goes on to refer to this as a fragmented labour market.
This view however has been rejected by Mazumdar (1976). He questions the contention that "the characteristics which constitute the basis of the formal informal sector distinction represent a pattern of continuous variation in a typical LDC labour market and therefore, the dich otomy is unwarranted". As he rightly points out, the so-called continuum along the relevant characteristics is itself a subject of research. He further argues that even if the difference is one of degree, as long as it is distinctly marked degree, the concept remains, analytically relevant.
However, as he himself identified, the informal sector is highly differentiated. He places great importance on the diversity of earnings within the important components of the informal sector. "The differentiation within the sector should be a topic of further research. At the moment we do not know how much upward mobility in term of earnings, there is within the sector'' (p 675)'. This latter view is also supported by Standing (1977). He emphasises the need to look beyond the two sector approach. However, he claims that this need not imply the total irrelevance of a sectoral approach. It is useful if the conceptual distinctions amongst several sub-sectors facilitate, "a policy-oriented discussion of the dynamic interactions between different sub-sectors and the changes that could be expected to follow specific developments" (p 37).
The conceptual developments traced above also reflect different policy implications. There are at least three distinctly different views"in this regard. The first view places emphasis on the function of the informal sector as a buffer zone. The proponents of this view do not consider it "feasible to accept that policies should be oriented towards maintaining inefficient and small scale activities which make use of retrogressive technology" (Breman, 1976, pp 187-9). Only the fastest possible expansion of the formal sector is considered appropriate for raising the standard of living of the population. The theoretical works of Lewis (1954) and Fei and Ranis (1964) and the earlier policy approach by World Bank illustrate such an
* In operationalising the differentiation, Har riss's (1981) work on Coimbatore provides an interesting case. He distinguished amongst the workers in five major groups, namely, (a) permanent wage-workers/organised sector workers, (b) short-term wage workers/workers in unregulated establishments, (c) casual wage workers, (d) disguised wage workers and dependent workers/dependent producers and traders and (e) self-employed. He then identified the characteristics of the different sections of the work force, examined factors affecting 'entry' to different forms of employment and mobility among them. He found differentiations amongst these by origin of workers and low mobility amongst different sectors. Similar differentiations were adopted by Papola (1978) for his study of the informal sector in Ahmedabad. He distinguished foui major categories, namely, workers in small establishments, independent workers, casual workers in establishments and in households.
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"inherent disadvantage approach" (Breman, 1976 footnote 18). It was in the early sixties that the failure of accelerated growth policy was recognised by policy makers and the researchers the world over. Although a late realisation, the World Bank report by Chenery et al put this explicitly. They said:
It is now clear that more than two decades of rapid growth in underdeveloped countries has been of little or no benefit to perhaps a third of their population. Although the average per capita income of the Third World has increased by 50 per cent since I960, this growth has been very unequally distributed among countries, regions within countries and socio-economic groups (1974, p xiii).
The Second view, largely promoted through ILO's studies under the World Development Programmes emphasises the "structural disadvantage" approach. The major premise of this view is that despite the advantages of the informal sector in terms of "flexibility, viability and adapted technology of productive activities", it is disadvantaged by unfavourable market conditions and lack of government or political protection. The policy orientation is, therefore, obviously towards compensatory measures like better credit, technical training and formation of cooperatives. This view and policy approach has been criticised by some critics who believe that the expected autonomous growth of the informal sector is not likely to take place. The few successful efforts probably are "the ones which have formalised another sector of the market to the advantage of the enterprises now in it and to the relative disadvantage of new comers or those left outside" (Peattie, 1980, p 25).
This leads to the third view which stresses the importance of the linkages of the informal sector to the rest of the urban economy. The results of a number of studies have conclusively shown that the informal sector is not an exclusive and independent circuit. It is therefore considered necessary to increase the production system as a whole. In Papola's (1978) words, "the need, therefore, is to look at the two sectors as interlinked and complementary segments of an urban economy instead of juxtaposing one against the other and evolving a strategy based on one in preference over the other" (p 177). Within this broad approach, however, there are two views. One regards these linkages as 'benign' and emphasises the need to promote these further (Weeks, 1975). However, a second view, supported by a number of researchers, brands these linkages as exploitative and highly unfavourable
to the smaller enterprises. In their view only a 'radical restructuring of the "total economy can change these conditions.
The informal sector has its theoretical basis in dualistic concepts and has been used as a policy tool by ILO's target group approach. ILO's emphasis on .the informal sector has had a positive influence in
shifting research emphasis to the whole gamut of complex activities from which a large section of the urban population literally derives its daily bread. The conceptual developments in this field suggest three basic areas of concern; namely, the characteristics of the informal sector, its linkages to the rest of the urban economy and the differentiations within the so-called informal sector itself. Most of the studies emphasise the non-exclusiveness of
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the informal sector from the rest of the economy. The possibility of the positive growth of the informal sector with beneficial impact for weaker sections is considered dependent on the nature and types of linkages that are operating in reality.
It is clear that the review has raised a number of questions which should be the concerns of future research in this area. The issues for further research are far too numerous to present an exhaustive account here. However, the following areas may be considered quite important. Firstly, there is a need for more detailed studies of activities and establishments in the informal sector focusing on their internal structure, nature of linkages and their economic viability. It is necessary to capture the internal differentiations within the broad umbrella of the informal sector and the response of different activities to different policies. The second major area of research is with respect to detailed studies of labour market processes. The questions of effective access criteria for entry into the variety of economic opportunities, patterns of mobility and levels and determinants of labour earnings will throw more light on the labour markets at the lower strata of the urban economy.
Lastly, it is necessary to expand the scope of such studies to understand the effect of city size, function and the contextual historical development on the above patterns. More studies in different urban areas which use workable, locally relevant and yet comparable definitions of sectors and activities would enable us to gain a better understanding of the role of the urban economy in these processes.
While such research is extremely important even for gaining a better understanding of the processes of urban economic development, the major objectives must relate to an improvement in decision making by policy makers. It is, therefore, not only essential to understand how and why the urban economy develops in a particular manner, but we need to clearly examine the impact of these developments on workers and households in the urban areas as well as the potential future supply from rural areas. The relevant policy directions can thus only emerge from integrating the findings of these different research issues and relating them to poverty, inequality and development.
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