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Systematic Review of Informal Urban Economies

Department of Geography and Environmental Studies, University of Zululand, KwaDlangezwa 3886, South Africa
Department of Geography, University of the Free State, Phuthaditjhaba 9869, South Africa
Author to whom correspondence should be addressed.
Sustainability 2021, 13(20), 11414;
Received: 22 July 2021 / Revised: 4 October 2021 / Accepted: 7 October 2021 / Published: 15 October 2021
(This article belongs to the Special Issue Urban Economics, City Development and Future Social Challenges)


Amid globalization and market liberalization, urban informality has continued to grow in leaps and bounds in many parts of the world. Against this backdrop, the purpose of this paper is to provide a systematic review of studies conducted on urban economic informality at various geopolitical contexts to provide an update on the current state of knowledge in the urban informal economy-related research. A total number of 290 studies were sourced from various academic sources; however, a total number of 166 research papers satisfied the requirements of this review paper. The findings of this paper show that research on the urban informal economy has grown from 2000 to 2021, which is a 22-year period in which this review paper was based. The main themes of urban economic informality research depict it as a multifaceted system that is constituted by inputs, processes and outputs that have linkages with the formal economy. Based on these findings, it is recommended that more research should focus on how to integrate research on urban economic informality into the broader agenda of sustainable development.

1. Introduction

The phenomenon of urban informalities is a global reality that manifests both in the cities of the developed and developing countries [1,2]. Urban informality is a broad concept which normally describes spatial, political, and economic practices which are not formal, such as street trading and slum housing [2,3]. In addition to this, there are other concepts which are used interchangeably to describe urban informality; these terms are the informal sector, informal economy, and informal employment, but these concepts hold different meanings. For instance, the informal sector refers to production and employment that occurs in unregulated or unregistered enterprises, while informal employment refers to any form of employment which is without social and legal protection, and lastly, informal economy refers to all informal economic units, informal economic activities, and informal workers [4]. However, for the purposes of this paper, the focus is on Urban Economic Informality (UEI). In this paper, the concept of UEI is used synonymously to the urban informal economy and it should be understood that these have similar meanings and connotations. In most instances, urban economic informality is characterized by informal economic activities that are undertaken for the purposes of earning a living for survival, profit, or a combination of the former and latter; however, these economic activities may not satisfy laws in relation to but not limited to production and distribution regulations [5,6]. Other definitions view urban economic informality as characterized by informal economic activities, informal enterprises, low productivity, and unregulated labour [7]. However, recent definitions of urban economic informality have incorporated the expanded statistical component, which uses the size of the enterprise, and some use labour rights [4,8,9]. In this paper, urban economic informality should be understood as a set of all legal informal economic activities, informal enterprises, and unregulated labour, which occurs as a result of earning a living or profit accumulation but occurs outside of the ambit of the regulatory framework put in place by government [6,7].
Over the last decades, studies on the UEI show that informal economic activities across the globe have played a fundamentally important role in providing socioeconomic livelihoods such as job creation, poverty eradication, and narrowing the levels of inequalities [7,10]. For instance, in European countries such as the United Kingdom and Italy, the UEI has been part of the economic building blocks towards employment creation [11]. Similarly, in Sub-Saharan Africa, urban economic informality has played a pivotal role in many impoverished communities regarding job creation, poverty alleviation, and the general upliftment of living standards [12,13]. A considerable number of studies have emerged showing that the UEI has been an integral part and pillar that characterizes many emerging economies in countries of the Global South [14,15,16,17,18].
Despite the positive and significant contributions of the UEI across the globe, studies have also documented what are considered to be negative impacts associated with the escalation of this economic activity [19]. For instance, the spread of urban economic informality has led to the deterioration of infrastructure [20]. The encroachment of UEI in various spaces of cities has triggered so-called spatial transgression and disorderliness [21,22]. Thus, the rapid growth of urban economic informality has exposed the inabilities of local planning authorities to keep pace with this occurrence [7]. Urbanization has been identified as a catalyst and a driving force behind the exponential growth of urban informality across many parts of the world [23]. Unprecedented rapid urban sprawls in the outskirts of many urban and semi-urban areas have been another area of concern as the UEI continues to grow [24].
The proliferation of studies on the UEI has sparked a rigorous debate around its definition and conceptualization. This has led to four main perspectives which attempt to define the phenomenon, and these are: dualism, structuralism, legalism, and postcolonialism/social relations. The dualist perspective posits a dichotomy and autonomy between the formal and informal economy, with the former being underpinned by a capitalist orientation while the latter being modeled around the subsistence economy [5,25]. Dualists hold a strong view that the heterogeneity of the formal and informal economic actors is characterized by different modes of production that are key determinants of the production output of both these sectors [26,27]. As a result, modern and dynamic modes of production such as high modern technology is an instrumental and catalytic factor that enhances and maximizes the production output in the formal economy [5], while on the other hand, the UEI is regarded as a peripheral and marginal economy that is characterized by traditional modes of production that yield low productivity [28].
The structuralist perspective, also known as the neo-Marxist approach, posits that UEI has snowballed in countries with industrialized economies [29]. Structuralists posit that UEI is systematically linked to the formal economy through the informalization of formal economic activities [30]. In this instance, retrenchments caused by global economic downturns are identified as a defining feature that has propelled the exponential growth of UEI [31]. In this sense, urban economic informality illustrates capitalism’s exploitative nature, which rises due to subsuming the informal economic actors into the mainstream economy [32].
The legalist perspective states that the exponential growth of UEI can be attributed to the existing stringent and exclusionary legal regulatory framework set by government institutions [33]. Bureaucratic procedures characterizing the scope of work of the legal regulatory framework have been identified as an obstacle that has caused the stigmatization of informal economic actors as custodians of illicit informal activities [34]. Legalists view that the hostility exerted by the legal system or regulatory framework creates high barriers of entry to the formal economy; thus, the majority of people resort to capitalizing on the low barriers of entry to UEI to earn a living [29]. This has heightened the prevalence of self-employment occurring through urban economic informality outside of the prescribed legal regulatory scope [35].
Postcolonialism emphasizes the need to understand the various geopolitical contexts in which urban informality manifests itself, playing a primary role as a livelihood source for many people [36]. Post-colonialists suggest that urban economic informality is a common feature in many parts of the world; however, the characteristics of UEI vary according to the social, economic, political, and legal attributes [37]. The post-colonialism perspective views the participation of people in UEI primarily as a form of strengthening social relations [31,36]. As a result, participation is understood not to be driven by the desire to attain economic gain but to generate livelihoods for purposes of strengthening social networks [31].
Taken together, these perspectives show that there is no agreement on the definition of UEI, which not only suggests the complexity and importance of this economic activity but also the need for further research. Thus, given both the importance of UEI and the different perspectives on the phenomenon, it is important to conduct a systematic review of this economic activity. Therefore, the purpose of this paper is to provide a systematic review of studies conducted on UEI in various geopolitical contexts. This review aims to provide an update on the current state of knowledge in the urban informal economy.

2. Materials and Methods

2.1. Search Strategy and Identification of Studies

A systematic search was conducted for the purposes of identifying and analyzing relevant journal articles from credible data sources. Scientific and electronic databases containing relevant and credible published journal articles, namely Science Direct, EBSCOHOST, Google Scholar, and websites of international organizations such as Women in Informal Employment: Globalizing and Organizing (WIEGO) and the International Labour Organization (ILO) were also searched. These data sources were searched from the period of February 2020 to June 2021. The search for journal articles consisted of broad and narrow terms. In addition, also important to the search strategy for data sources was to consider the use of different terminologies or concepts which are used in different regions in relation to UEI. The diversification of the words used in the search strategy was key in ensuring that multiple journal articles published from across different regions are included in this review paper. Keywords in the primary search included: informal street traders OR street vendors OR informal sector OR informal enterprises OR informal business OR informal institutions OR informal labour markets OR informal economy OR informal trading OR informal township economy OR urban informality OR informal economic actors OR informal sector OR informal employment OR gig economy OR shadow economy OR popular economy. What led to the identification of these search terms is the main focus of this review, which is urban economic informality. References in the bibliographies of the searched journal articles were also systematically searched to extract relevant documents in line with this review. The systematic search process which was conducted through scientific and electronic databases also yielded results of sources of information such as books and working papers, hence the inclusion of books and working papers in this review article.

2.2. Inclusion and Exclusion Criteria

This review was guided by the inclusion and exclusion criteria outlined in Figure 1 below. The review included studies that were written and published in English from various scholarly sources. The title and abstract were prerequisites that formed a fundamental predetermined standard and requirement for this review. Excluded articles were not considered in this review because, after an extensive literature review, it was discovered that their contents were not focusing on UEI, and some were duplicates of other papers that were already considered for this review. Moreover, additional articles were excluded due to publication in languages other than English.

2.3. Classification of Journal Articles

The reviewed papers were classified into four major themes, namely theoretical, applications, systems, and multiple themes/categories. This classification arises from the content of the reviewed papers. These themes are a summary of the key research areas of the reviewed papers.

2.4. Limitations of the Systematic Review

This systematic review has a variety of limitations. For example, the systematic search for data sources was confined to a certain period of time, 2000–2021, meaning papers that were published prior to the year 2000 were not included in this review article. Other limitations included access to limited data sources and papers that were excluded on the basis that they were not published in English.

3. Results

3.1. General Characteristics of Studies

The results of this study are based on 166 publications that met the inclusion criteria as outlined in the previous section. Before the analysis, we decided to classify all publications into four categories to understand the foundation from which they were conducted; these include systems-related articles, applications, mixed themes, and theoretical articles, and the results are displayed in Figure 2. From this figure, it is apparent that the majority of UEI publications (44.6%) were systems in nature. These articles investigated the systems of and/or processes around UEI. These articles focused on studying urban economic informality as a multifaceted system that is constituted by inputs, processes, and outputs that have linkages with the formal economy. These studies demonstrated that the urban informal economy does not exist in isolation from the formal economy, but the value chain system links the two economies. In the second place are the theoretical articles (28.9%), in which four main perspectives of urban economic informality come to the fore. These are: dualism, legalism, structuralism, and post-colonialism. This is followed by 16.3%, which were articles published containing mixed themes which cut across several themes. These articles covered key aspects of the theorization of UEI and systems and processes of UEI which are similar to the other themes highlighted in the part preceding this. The remaining 10.2% were on applications-related articles. In the context of applied research, the studies looked at ways of providing solutions to existing problems on the mainstream development agenda, unemployment, and UEI.

3.2. Research Themes in UEI

3.2.1. Systems Related Studies of UEI

During the 2000–2010 period, 28 published articles covered the thematic aspect of systems-related research on the UEI research. A systems approach points that the emphasis of these papers was on the complexity of UEI as a combination of a diversity of informal economic activities. For instance, between 2000 and 2010, evidence from the reviewed studies reveal that UEI is composed of various multifaceted informal economic activities ranging from street traders (mobile and stationed petty traders), home-based enterprises, shuttling, flea markets, hairdressers and street barbers, child-minding, liquor outlets, backyard workshops/repairs, and many other forms of informal economic actors [38,39].
Between 2011 and 2021, 46 published articles emphasized the same issues as in the 2000–2010 period. The reviewed studies point that UEI is multifaceted, and its composition is based on a variety of sectors and subsectors. For instance, informal economic activities that constitute UEI are in the retail sector, agriculture and agro-processing, finance, manufacturing, service industry, tourism, ICTS, green economy, community services, transport, creative arts, and construction [40,41,42]. While on the labour dynamics, the systems approach points that some of the reviewed papers between 2011 and 2021 show that the labour force in UEI is characterized by predominantly unskilled labour, irregular and insignificant incomes, unhealthy and unsafe working spaces, various forms of informal employment, and diverse informal economic activities (see [42,43,44,45,46]). Although the notion that UEI is dominated by migrants and an unskilled labour force is contested, Obeng-Odoom and Ameyaw [47] argues that unlike in the past, the labour force demographics have changed from a predominantly migrant, unskilled, and uneducated labour force to a skilled, educated, and mixed labour force. According to Obeng-Odoom and Ameyaw [47], there is a combination of factors influencing the change in the dynamics and demographics of the urban informal economy, chief amongst those being the rising levels of poverty and unemployment.
Based on the dynamics and shifts presented in the reviewed papers between 2011 and 2021, new trends suggest that there is undoubtedly a very sophisticated interplay between the formal and the informal economy. The reviewed papers show that the relationship between the formal and informal economies is demonstrated mainly through the value chain system, which links informal economic actors with producers and suppliers in the formal economy. For instance, Petersen and Charman [48] indicate that the production and supply chain of informal foodservice operators is dependent on the formal economy wholesalers and producers for goods and services rendered in UEI. While Smit and Musango [49] also demonstrate the connection between the formal and informal economy by revealing the role of waste pickers and their connection with recycling industries in the green economy. This argument on the link between the formal and informal economy can further be advanced by looking at the parasitic behaviour of formal businesses on the labour surplus in UEI. It is evident that formal enterprises poach the labour force and services in the informal economy mainly to reduce production costs [50]. Considering all these factors and dynamics, it is clear that there is a very delicate and sophisticated interplay between the formal and formal economy. All these debunk the binary of the formal–informal myth that exists between the formal and informal economy.

3.2.2. Theoretical Studies

The 166 reviewed articles reveal that the debate on the conceptualization of urban economic informality is prominent. For instance, from 2000–2005, there was a total number of seven articles on the theoretical theme of UEI research. For example, Rogerson [38] conceptualized and defined UEI as a conventional set of unregistered informal enterprises evading tax. Moreover, Rogerson [38] categorized these informal enterprises as survivalist informal enterprises and micro-enterprises. According to Rogerson [38], the former is a combination of informal economic activities undertaken by individuals to secure a living income. While the latter are regarded as micro-enterprises that are unregistered small informal businesses that operate in proper business structures that involve the owner, family members, and few paid employees. Other definitions of the urban informal economy between 2000 and 2005 focused on UEI as a set of heterogeneous informal economic activities, which do not adhere to the business regulations put in place by the government [39]. Furthermore, their nature of employment is characterized by self-employment (home production and petty traders) and small incomes [39]. Taking into account all these definitions, it is undoubtedly clear that the emphasis of these papers was on conceptualizing UEI within the prism of the dualistic perspective, which states that UEI is a remnant of the pre-capitalist modes of production that is bound to disappear with modernity [27].
Meanwhile, from 2006–2015, a total of 23 papers were published. These papers continued to emphasize the conceptualization of urban informality as separate from the formal economy. Though the informal economic activities from the reviewed articles between 2006 and 2015 reveal the growth trajectory of UEI, the attitude and perception from the reviewed articles point to the dichotomy that exists between the informal and formal economies. For instance, Skinner [51] indicates that in some instances, the separation between the two economies (formal and informal) has been entrenched in the categorization of these economies as “first” and “second” economies in South Africa. This categorization symbolizes the existing disconnect between the formal and informal economy, but these connotations also suggest that the former is superior and significant while the latter is inferior and insignificant.
Similarly, Potts [27] states that the conceptualization of UEI using the dualist perspective is in the ascendancy again. The ascendancy of the dualistic perspective during this period (2006–2015) has influenced the majority of the studies to conceptualize and define UEI using terms such as grey, unregistered, backwardness, hidden, parallel, second, marginal, black, irregular, traditional, shadow, underground, unregulated, and many other terms that depict UEI as a negative socioeconomic phenomenon (see [11,52,53,54]. During the same period between 2006 and 2015, there was a significant increase of studies that attempted to expand the definition of the UEI to include domestic workers, prostitutes, and big firms operating outside of the prescribed regulatory framework. For example, Elgin and Oyvat [55] argue that, despite many definitions that exist in the literature, the manner in which urban informality has been conceptualized over the years has excluded the large-scale firms which operate unregulated. On the other hand, Onyebueke and Geyer [56] also argue that the theorization of urban economic informality has often neglected home-based informal enterprises as part of the broader UEI. Adding to this discourse, Thukral [57] further argues that the definition of UEI has left out domestic workers and sex workers.
From 2016–2021, a total of 18 papers out of the 166 were published. These papers did not make any significant contribution in terms of taking the debate forward and putting it into its finality. Instead, their arguments were a reiteration and resemblance of previously published articles. Although there are other studies that argued for a more sophisticated conceptualization of urban economic informality. For instance, Banks et al. [3] argue that urban economic informality should be considered as a critical site of analysis that combines the social, economic, political, and spatial realms rather than the narrow and simplistic dichotomies that are utilized to study urban economic informality. Williams et al. [58] has argued for a sophisticated theorization of urban economic informality based on the recognition that the motivations for people engaging in this economic activity are more complex than has been portrayed. Overall, the plurality of urban economic informality definitions is a clear indication that there is no consensus on how the four contending schools of thought, namely, dualism, structuralism, legalism, and postcolonialism, view UEI. In other words, there is no unanimous definition of the phenomenon. Considering all these ideological contestations, it is clear that the debates contributed little on the evolution of definition of UEI and towards the consolidation of an accepted and unitary theoretical framework on UEI. All these factors suggest more research and publications towards a definition of the urban informal economy are needed.

3.2.3. Multiple Themes/Categories

In the period of 2000–2010, an overview on the reviewed articles during this period shows that only nine of the reviewed articles covered segments of UEI research which focused on theoretical and systems thematic areas. These articles focused predominantly on the conceptual theorization of UEI and the systems of UEI. For instance, on the theoretical aspect, UEI is conceptualized as a shadow economy which consists of unregistered economic activities, which are likely to disappear with economic modernity [59]. The conceptualization of UEI along the dualistic perspective reaffirms the articulation made by Potts [27] in the section preceding this. Other reviewed articles during the period of 2000–2010 highlighted the terminological confusion around UEI. Gerxhan [60] reveals that the difficulty of defining UEI has resulted in the use of terms such as bazaar-economy, black market, underground economy, hidden economy, parallel economy, and second economy. This affirms that the debate on the conceptualization and theorization of UEI has not been settled. Meanwhile, between 2000 and 2010, the reviewed articles in the systems thematic area emphasized the interconnectedness of both the formal and informal economy. Devey et al. [61] argues against the distinction created between the formal and informal economy. The bone of contention raised by Devey et al. [61] is that there is no fine line that separates the formal and informal economy, hence, any attempt to create a dichotomy between the former and the latter will result in glossing over the linkages. The argument advanced by Devey et al. [61] further points to the dependency of the formal economy from the informal economy in terms of labour supply. This interplay and causality between the formal and informal economy is similar to the articulation of Meagher [50] highlighted in the section preceding this one. Considering the views from these reviewed articles, it is clear that there is a strong view that both the formal and informal economy do not exist in isolation. Hence the need to acknowledge the interplay and coexistence between the formal and informal economy.
Similarly, between 2011 and 2021 a total of 18 published articles covered research aspects of UEI which cut across both the theoretical and systems related themes. On the theoretical aspect, there is continuous emphasis on the contending theories that dominates UEI debate. Apart from the contending theoretical perspectives on UEI, there is a view that these perspectives have failed to take into account the historical and structural differences which influence the manifestation of UEI at various geopolitical contexts. As such, Yusuff [62] argues that these theoretical perspectives gave little consideration in trying to understand the varying structural and historical circumstances surrounding the emergence of UEI in the developed countries, Latin America, and Africa. As a result, Yusuff [62] suggest that there is a need for a theoretical framework that will analyze the origins of UEI, the causes of UEI, and factors that exacerbate its occurrence. The general consensus that prevails amongst these theoretical perspectives is the fact that the phenomenon of UEI occurs as a result of varying economic, political, social, and legal characteristics [31]. As a result, UEI is undoubtedly a powerful and useful source of employment and livelihoods for the urban poor [63].
In the same notion, a portion of the reviewed articles from 2011–2021 on the systems thematic aspect brought to the fore a different dimension. In terms of the interconnectedness of the formal and informal economy, Yusuff [62] affirms the causality between the two sets of economies. The interplay between the formal and informal occurs in terms of distributive and supply linkages. For instance, Yusuff [62] points to a case of South Africa and Nigeria whereby the formal economic actors expand their markets through informal economic actors. Moreover, Moreno-Monroy [18] reiterates further on the connection of the formal and informal economy in terms of agglomeration economies. According to Moreno-Monroy [18], this sophisticated interplay between the formal and informal occurs in terms of forward and backward linkages. An equally important study is that by Williams et al. [58], which has not only shown the interconnectedness of the formal and informal economy but has also advanced the need for a sophistical theorization around the extent to which the characteristics of the enterprises and their owners more than the motives and regulatory frameworks determine why they choose to operate formally or informally. This paper therefore discusses, among others, theoretical and systems related themes. Apart from the formal and informal linkages, based on the reviewed articles, it appears that there are disparities in terms of preference on the type of informal economic activities between men and women. For instance, the majority of male traders prefer large-scale economic operations, which are non-food-related economic activities, while their female counterparts tend to focus on smaller scale operations, which are largely food-related economic activities [64]. This seem to suggest that the participation in UEI is divided along gender roles judging by the preference on the type of economic activities between men and women.

3.2.4. Applications Related Studies of UEI

For this study, applications should be understood in the context of applied research, which seeks to provide solutions to existing problems around UEI, unemployment, and general socioeconomic development. On that note, a total of seven reviewed papers focused on the thematic aspect of applied research on UEI. Between 2000 and 2010, the reviewed papers extensively covered the socioeconomic importance of UEI as an antidote to poverty and unemployment. For example, Rogerson [38] indicates that UEI in a post-democratic South Africa has gained prominence and attention as an important player in the national agenda on employment creation and poverty alleviation. Skinner and Valodia [65] also discuss how UEI contributed towards the distribution and improvement of incomes for women in the urban informal economy of Durban, South Africa. Similarly, Khotkina [66] further states that UEI has been instrumental and catalytic in providing amicable solutions to the exacerbating issues of poverty and unemployment. The socioeconomic importance of the urban informal economy has been expressed by Thukral [57] by stating that UEI remains the largest source of employment and income generation for women in the global South.
Moreover, between 2011 and 2021, 10 reviewed papers reiterated the socioeconomic importance of UEI in resolving socioeconomic challenges such as poverty and unemployment. Evident to this assertion, the reviewed literature shows that UEI accounts for over two billion of the world’s employment, which is equivalent to approximately 61.2%: 25.1% in Europe and Central Asia; 40.0% in Americas; 91.0% in Central Africa; 91.6% in Eastern Africa; 92.4% in Western Africa; and 84.3% in Southern Africa [8]. Apart from these statistical breakdowns, Diallo et al. [42] further affirm the socioeconomic importance of UEI on poverty eradication and employment creation. It is also evident that street trading/petty trading, prostitution, informal enterprises, including home-based businesses, day workers such as gardeners, and domestic workers are amongst the sources of income that have been instrumental in creating employment and eradicating poverty [41,42,56]. Overall, this analysis shows that more research has focused extensively on the theoretical part of urban economic informality. The limited research around the systems and applications-related studies provides an opportunity for future studies to utilize an applied and systems approach to urban economic informality. For example, more applied research on urban economic informality could assist in understanding the hotspot areas of urban economic informality and the spatial distribution of the phenomenon. However, equally so, this type of study or research could play a pivotal role in setting a new agenda of contemporary urban and spatial planning, which considers urban economic informality on the mainstream planning processes conducted by institutions such as municipalities.

3.3. Trends and Patterns of UEI Publications between the Year 2000 and 2020

The historical trends and patterns of UEI publications spanning the 22-year period between 2000 and 2021 are displayed in Figure 3. The number of research works on UEI has increased over this period. From 2000–2009, the number of published papers ranged between 1 and 9, and then an increase is noted from 2010, reaching a peak of 29 publications in 2018. There are many potential factors that could have influenced the trends and dynamics of UEI publications over the 22-year period. For instance, the continued increase in urban economic informality led to renewed attention, research, and policy attention being given to UEI. In summary, this suggests that the field of the urban informal economy is an active area of research in the realm of contemporary socioeconomic policy agenda.
An important issue which needs to be emphasized is that the analysis in the previous and this section was divided into time periods, such as from 2000–2005 and so on. This was done for the convenience of analysis, because, in reality, discussions on some themes have persisted over a longer period of time. This is particularly reflected in Section 3.2.3, which shows that the debates on a variety of themes have continued steadily between the period under review.

3.4. Dominant Economic Activities in UEI

Urban economic informality is broad and complex. This has been evident through the multifacetedness of informal economic activities which characterize and define the true nature of urban economic informality. However, it must be noted that various geopolitical contexts yield different types of informal economic activities, which are largely influenced by the economic, social, and political systems. For instance, the Global North specifically countries such United States, Italy, United Kingdom, and many others, market reforms and privatization are amongst the key factors that have caused the proliferation of informal economic activities [28,67]. As a result, urban economic informality in the Global North is largely characterized by street vending and home-based informal enterprises, which are predominantly operated and owned by immigrants [28]. The lack of legal rights to live and work in a host country is what pushes many immigrants to rely on urban economic informality for survival and livelihoods [63]. Moreover, another interesting observation in the Global North is that urban economic informality is predominantly manifesting itself in many urban slums where a majority of the home-based informal enterprises are operated.
Contrary to the situational analysis of the Global North, urban economic informality in the Global South is constituted by heterogeneous informal economic activities. In Africa and Latin America, the plurality of urban economic informality is characterized by numerous types of informal economic activities. For instance, urban economic informality in the Global South is spread across various sectors, these include, but are not limited to, the retail sector, agriculture and agro-processing, finance, manufacturing, service industry, tourism, ICTS, green economy, community services, transport, creative arts, and construction [10,41,42]. Apart from the sectoral composition of urban economic informality in the Global South, the types of informal economic activities are diverse and multifaceted, so are the locations where these informal economic activities where manifest. The common prevalent informal economic activities in the Global South range from but are not limited to street traders (mobile and stationed petty traders), home-based enterprises, shuttling, flea markets, hairdressers and street barbers, child-minding, liquor outlets, backyard workshops/repairs, and many other forms of informal economic actors [38].
Based on the reviewed articles, the most common features or types of urban economic informality both in the Global North and South are street trading and home-based informal enterprises. Although it is worth noting that the Global South presents a much broader and complex scope of urban economic informality as opposed to the Global North. These disparities can be better explained by the varying geopolitical contexts which have different economic, social, and political systems which define and influence the proliferation of urban economic informality and the socioeconomic condition.

3.5. Geospatial Distribution of UEI Publications

In addition to the analysis of the trends around publication on UEI as discussed in the preceding part, an essential element of the review is to describe the geospatial distribution of UEI publications. In this regard, Figure 4 below illustrates the geospatial distribution and proportions of the 166 studies which were reviewed and considered in this review study. It shows the locations in terms of continents and countries where these studies were conducted. Based on the illustrations made in Figure 4, firstly, there is an affirmation that indeed urban economic informality is a global phenomenon that manifests in various parts of the world, both in countries with affluent and emerging or developing economies. This has been evident since urban economic informality accounts for over two billion of the world’s employment, which is equivalent to approximately 61.2% [8]. The illustrations also nullify the narrative or belief that urban economic informality is a phenomenon that is prevalent and associated solely with developing countries, particularly developing countries in the Global South but specifically African countries. It debunks the myth or assumption that urban economic informality is synonymous with backwardness and underdevelopment, predominantly associated with less developed countries [27].
Secondly, as Figure 4 illustrates, most of the reviewed articles were predominantly conducted in many countries in Africa, making Africa a hub and hotspot area regarding research in the urban informal economy. Urban economic informality in the Southern African region contributes to approximated 84.3% in informal employment, which is lower than the 91.0% of Central Africa, 91.6% of Eastern Africa, and 92.4% of Western Africa [8]. Africa accounts for 83 papers from the total number of 166 articles for this review. These studies in Africa are spatially distributed in Burkina-Faso, Ghana, Guinea, Madagascar, Nigeria, Tanzania, Ethiopia, Uganda, Zimbabwe, and South Africa, the highest contributor with 37 of the 166 studies that were considered for this review paper. In countries such as Ghana, Nigeria, Tanzania, Zimbabwe, urban economic informality has played an essential role in economic development, resulting in positive outcomes in narrowing income gaps, income distribution, poverty eradication, and GDP growth. It is also important to understand that urban economic informality in these countries is characterized mainly by an unskilled labour force with either no or little formal education and skills. The majority of the participants in the urban informal economy in Africa are driven by poverty; thus, urban economic informality becomes an easy point of entry for survival. All these dynamics indicate the complex nature of UEI and the heterogeneity of the characteristics and the types of informal economic activities that define informality according to various geopolitical contexts.
Moreover, the dominance of Africa in terms of UEI publications on the geospatial distribution of these studies emanates from the historical Economic and Structural Adjustment Programmes imposed by the IMF and World Bank across Africa, which triggered recurring economic difficulties across the African continent, leading to many people engaging in urban economic informality [27,28]. Moreover, the proliferation of UEI publications in Africa cannot be viewed in isolation from the premise that urban economic informality in Africa has occurred due to increased urbanization without industrialization [28]. Thus, the socioeconomic challenges such as unemployment and poverty are facing Africa today [27]. With African cities projected to account for 75% of the world’s urban population by 2050 [68], this then suggests that we will continue to witness the trajectory of urbanization without industrialization in Africa, which has been a catalyst and central to the exponential growth of urban economic informality (see, e.g., Moyo et al. [31]). However, this also tells us that Africa is likely to continue being dominant in so far as urban economic informality research is concerned and the fact that urban economic informality will continue to increase. However, within Africa, South Africa has more publications on UEI in the time period under review. This could be explained by the fact that the country not only has increasing levels of unemployment amongst the native population but also the increasing number of immigrant businesses. These (immigrant informal enterprises) are thriving based on the fact that immigrants face structural impediments around the labour and capital markets, which forces them to engage in the urban informal economy [63]. A case in point is that, in many instances, migrants are not always employed in South Africa largely as a result of the labour laws and the fact that some are undocumented, and hence, they resort to urban economic informality for livelihoods [31,63]. Therefore, all these factors have added to the need to research urban economic informality in South Africa extensively.
Lastly, Figure 4 further illustrates that out of the 166 studies included in this review, the geospatial distribution points at Europe as the second-highest contributor from the total number of the 166 studies. Europe have a share of 39 articles from the total. These studies are shared amongst countries such as United Kingdom, Netherlands, Finland, Spain, Switzerland, Italy, Poland, Scotland, Kosovo, Croatia, Denmark, Romania, Russia, and Turkey. In the case of European countries, the prevalence and exponential growth of urban economic informality have been a result of several factors, prominent amongst a variety of these factors being economic downturns and the changes in the modes and methods of productions [12,28]. These two factors have caused serious industrial retrenchments resulting in labour surplus, which turned into the informal economy for survival. Apart from the reasons stated above, just like the case of South Africa, urban economic informality in southern Europe in countries such as Italy also occurs as a result of the increased number of immigrant entrepreneurship [63]. The discriminatory labour and capital markets dynamics which exclude immigrants from securing jobs and other socioeconomic opportunities push them towards urban economic informality as their source of livelihood [63].
Similarly, Asia, which is the third-largest contributor, accounts for 22 papers from the total number of 166 articles that were included in this review. Evidence shows that the urban informal economy studies were conducted in countries such as Bangladesh, India, China, Indonesia, Japan, Vietnam, and Pakistan. The proliferation of urban economic informality in Asian countries, specifically China, has also been a result of the economic structural reforms, which resulted in massive urban poverty and labour surpluses [4]. At present, urban economic informality in Asia accounts for approximately 68.2% of informal employment [8]. As a result, the growth of urban economic informality across many parts of China has culminated into a constant and significant contribution of the informal economy to the broader goal of economic and social development. Meanwhile, other studies were also conducted in the Middle East in countries such as Iran and Israel, which makes this region account for 2 articles from the total number of 166 papers included in this review. Furthermore, in North America, there are a total number of 11 articles from the total number of articles considered for this review.
The United States of America and Mexico are the two countries where UEI research was conducted. In this region, urban economic informality has grown because of industrial retrenchments due to either the changing global economic landscape, informalization and downsizing of industries, privatization, inadequate social protection, and diminishing labour benefits and labour migrants. For example, in the United States and Mexico, migrant households have been central in the establishment of informal business, which has resulted in the growth of urban economic informality mainly as a result of responding to joblessness and poverty [68]. Likewise, Latin America and the Caribbean have also contributed nine papers on the reviewed studies, which are distributed amongst countries such as Brazil, Colombia, Argentina, Barbados, and Australia. This region has contributed to research on UEI, particularly in countries such as Colombia, Brazil, and Argentina, mainly due to rural–urban migration, which resulted in the formal economy being overwhelmed and unable to create more jobs making urban economic informality an alternative for survival in terms of livelihoods. In Latin America, urban economic informality accounts for an approximated 57% of employment and has continued to contribute significantly to GPD growth and the alleviation of poverty in the urban surroundings of the region [8]. The conditions and factors which have propelled the manifestation of urban economic informality in Europe are similar to those of North America, while South America shares similarities with Asia in terms of factors triggering the manifestation and growth of urban economic informality.
Overall, despite the varying scales of urban economic informality and the heterogeneity of the characteristics of urban economic informality, the global overview of the geospatial distribution depicted in Figure 4 is evidence that urban economic informality is a worldwide phenomenon. Thus, the spread and exponential growth of urban economic informality are influenced by various factors; as a result, the phenomenon of urban economic informality manifests itself at varying scales and proportions in different geopolitical contexts.
Figure 5 below provides details of the journals where the 166 eligible studies were published. These studies were published across 109 academic journals, which are outlined in Figure 5 below. However, these studies were predominantly published in the Development of Southern Africa Journal, Urban Forum, and the Journal of Development Studies. For example, the Development Southern Africa Journal published 6.0% of the reviewed articles, while the Urban Forum contributed with 4.8%, and lastly, the Journal of Development Studies with 3.1%, all contributing 13.9% of the total. Hence, this has presented an opportunity for more research to be conducted to probe further the contribution of urban economic informality to socioeconomic development in the Southern African region. Figure 5 below provides a full breakdown of the names of the academic journals where these articles were being published.

4. Discussion

This review generally reveals that urban economic informality is a common global phenomenon that continues to grow in leaps and bounds amid globalization and market liberalization. This has been evident from the reviewed studies, which show that research has been conducted in developing and developed countries. The emphasis from the majority of the reviewed studies has been on the conceptualization of urban economic informality, socioeconomic impacts of urban economic informality, types of informal economic activities, and the characteristics of urban economic informality. Thus, typical attributes of urban economic informality across many geopolitical contexts where urban economic informality exist reveal that the urban informal economy is composed of informal economic activities in retail, agriculture and agro-processing, finance, manufacturing, service industry, tourism, ICTS, green economy, government and community services, transport, creative arts, construction, and real estate. Moreover, in terms of the demographics of urban economic informality, findings show that there are more women involved in the urban informal economy as opposed to their male counterparts and the youth [9]. The dominance of women in the urban informal economy is attributed to gender inequalities and patriarchal beliefs that sideline and deprive women of obtaining jobs and other opportunities in the formal economy as opposed to their male counterparts [4,8]. As a result, urban economic informality becomes a convenient platform that allows women to acquire bargaining power and financial status [69].
Evidence from reviewed studies also point to the fact that the prevalence of urban economic informality occurs and varies according to geopolitical contexts; thus, the complexities and heterogeneity of urban economic informality also explain that the conditions that trigger the manifestation of this socioeconomic phenomenon are not uniform when analyzed and viewed from different regions. For instance, urban economic informality in Europe, North America, and many other affluent economies have continuously occurred as a result of plummeting industrial jobs, persistent economic downturns, downsizing, privatization, changes in the divisions of labour, and the changes in the modes and patterns of production [28]. Moreover, the increased number of migrants has been another catalytic factor that has added to the dynamics of the manifestation of urban economic informality in these countries.
On the contrary, there are prominent factors that account for the proliferation of urban economic informality in the Global South, especially in Latin America and Africa. While noting that, at present, urban economic informality in Africa accounts for 85.8% of its economy [8], urban economic informality in the African region has thrived as a result of the phenomenon of urbanization, which has occurred without industrialization (see [27,31]. Notwithstanding, other factors that have exacerbated the exponential growth of urban economic informality include the historical Economic Structural Adjustments Programmes, which were imposed by the IMF and World Bank, which plunged many African economies into a state of economic disarray. Meanwhile, in Latin America and the Caribbean, at present, the urban informal economy constitutes 57% of the total employment [8]; however, in this region, urban economic informality has occurred mainly as a result of the unprecedented phenomenon of rural–urban migration, which resulted in the formal economy being unable to create jobs [27]. This increased the number of the urban poor and increased the proportion of labour surplus, which then forced people to rely on the urban informal economy for survival.
Other evidence gathered from the systematic literature review is that the exponential growth of urban economic informality has sparked a renewed interest and attention, especially amongst academics, governments, and policymakers, because of its importance in socioeconomic development [12]. For instance, there is glaring evidence from reviewed studies that shows that urban economic informality has been instrumental in the creation of jobs, poverty alleviation, income distribution, and GDP growth. For instance, in Kenya, urban economic informality accounts for approximately 82% of the total employment; in Tanzania, it accounts for an estimated 75%, while in the Central African Republic and the Democratic Republic of Congo, the urban informal economy contributes up to 90% of job opportunities [10,70,71]. These are some of the successes of urban economic informality that have put it at the center of contemporary economics in the quest to achieve sustainable and inclusive economic growth. This is particularly more evident in countries of the Global South on which the majority depend on to address economic disparities and other socioeconomic challenges facing these countries.

5. Recommendations

Considering the title and scope of this journal, it is evident and clear that based on the reviewed articles, the current state of knowledge and research on urban economic research from 2000–2021 has failed to adequately cover the interplay between urban sustainability and urban economic informality. Based on the reviewed articles, evidence points at the gap and inability to explore how urban economic informality enhances urban sustainability. The concept of urban sustainability in the context of this paper should be understood within the confines and parameters of the concept of sustainable development. In light of the three fundamental pillars of sustainable development, which are economy, society, and environment, urban sustainability strives to improve the lives of the urban populace economically and socially while protecting the environment. Thus, there is a need to broadly and rigorously rethink the importance of urban economic informality in the broader scope of sustainable development. Urban economic informality within the context of sustainable development needs to be viewed and understood as a platform for mobilization against social and economic inequalities and exclusion.
Given the reliance of billions of people on urban economic informality as a source of livelihood and employment, future research should focus on how to infuse urban economic informality into the broader agenda of sustainable development. It means that urban economic informality needs to be taken more seriously than it is now and be equated to the same status and level as it is for the formal economy. It is also important is to eliminate the stereotype and stigmatization of urban economic informality as a trouble to a preconceived modern city and a spatial delinquency [21]. Moreover, the need for policy makers and governments to avoid viewing urban economic informality as an illegal phenomenon but rather as an essential role player in trajectory of economic growth and development [21].

6. Conclusions

This paper provided a systematic review of the current state of knowledge on urban economic informality (UEI) related research. As a result, based on reviewed studies, evidence shows that urban economic informality is a global phenomenon that has grown exponentially over the last decades, and it is predominantly a socioeconomic phenomenon that is largely prevalent in the Global South as opposed to other parts of the world. At present, Africa appears to be a hotspot area in terms of urban economic informality research, followed by other continents such as Europe, Asia, North America, and Latin America. Evidence points to the fact that urban economic informality is multifaceted and its characteristics are heterogeneous; thus, the factors exacerbating urban economic informality vary according to geopolitical contexts. Despite a considerable amount of research conducted on UEI, findings on this paper also reveal that the current body of knowledge as far as urban economic informality research is concerned has focused more on the theoretical aspect of urban economic informality, which focused extensively on the various conceptualizations of urban economic informality. This has caused some imbalances and gaps given the fact that other aspects of urban economic informality relating to applied and systematic approaches have received limited attention. Therefore, it is suggested the future direction of research on urban economic informality should focus more on a systematic approach in which urban economic informality is viewed as a system made of inputs, processes, and outputs. A deeper understanding of these inputs, processes, and outputs may assist in developing effective socioeconomic development policies linked to urban economic informality. A related issue is a need for more applied research on urban economic informality. In this regard, the focus must be on, among others, how urban economic informality could be utilized to effectively respond to socioeconomic development challenges in the Global South.

Author Contributions

Conceptualization, M.H.T.; I.M. and S.X.; Methodology, Formal Analysis, Resources, Writing of Original Draft, M.H.T.; I.M. and S.X.; and Review and Editing of Final Manuscript, I.M. and S.X. All authors have read and agreed to the published version of the manuscript.


The University of Zululand Individual Generated Funds (I Moyo-P394) funded this research. The APC was funded by the University of Zululand.

Institutional Review Board Statement

The study was conducted according to the South African government COVID-19 Protocols and regulations detailed in the Department of Higher Education and Training (DHET) GUIDE to planning, preparing for, and conducting fieldwork in the context of COVID-19.

Informed Consent Statement

Informed consent was obtained from all subjects involved in the study.

Data Availability Statement

Not applicable.


Not applicable.

Conflicts of Interest

The authors declare no conflict of interest.


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Figure 1. Inclusion and exclusion flow diagram.
Figure 1. Inclusion and exclusion flow diagram.
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Figure 2. Classification of publications based on their emphasis.
Figure 2. Classification of publications based on their emphasis.
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Figure 3. Trends in the number of urban economic informality papers published between 2000 and 2021.
Figure 3. Trends in the number of urban economic informality papers published between 2000 and 2021.
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Figure 4. Geospatial distribution of urban economic informality publications by country.
Figure 4. Geospatial distribution of urban economic informality publications by country.
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Figure 5. Journals where urban informal economy studies were published.
Figure 5. Journals where urban informal economy studies were published.
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Thulare, M.H.; Moyo, I.; Xulu, S. Systematic Review of Informal Urban Economies. Sustainability 2021, 13, 11414.

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Thulare, Mpendulo Harold, Inocent Moyo, and Sifiso Xulu. 2021. "Systematic Review of Informal Urban Economies" Sustainability 13, no. 20: 11414.

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