Production in the Informal economy

There are villages of West Bengal where the rural economy hinges on one or other particular activity. One cluster of craftsmen churn out wigs, another lights, another polo balls, another boats and another jeans.[i] Porter (1998) defined clusters as “critical masses in one place of linked industries” as the basis for competititive advantage and all over the world this specialisation is a feature of the informal economy. In fact, industrial clusters are a common rather than an exceptional form of development in India and elsewhere. What role does the informal economy play in cluster development?


Northern Italian Provinces such as Emila-Romagna are known for Lavoro negro (black work), as informal work has been styled. Small companies rarely market finished goods, but instead work under contract conditions for larger formal firms. Cooperatives of micro producers are found in knitwear, clothing and ceramic tiles around Modena and in motorcycles and footwear in Bologna.[ii] However, the Italian experience does not see immigrants in the majority in these jobs. Instead housewives, children, and domestic migrants occupy unskilled roles whilst the skilled workers often become the entrepreneurs that drive demand and coordinate supply. In similar ways the Spanish footwear industry in the 1980s and 1990s exported millions of dollars worth of shoes produced in factories that didn’t legally exist. And this occurred as official statistics chart the massive decline of employment in the sector. [iii]


There are many examples of specialisation within the informal economy or, within tightly knit cottage industries that cluster around a formal sector first tier supplier.


[i] Payal Mohanka, In the Shadows, Unknown craftsmen of Bengal (2007)

[ii] M.Castells & A.Portes, World underneath: The origins, dynamics and effects of the informal economy. From The Informal Econmy. Studies in Advancedand Less developed countries (1989).

[iii] Ibid. p 25.

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2 Responses to Production in the Informal economy

  1. robjbell says:

    What is the impact on the outsourcing debate? Is the full extent of the links between the formal and informal economy understood in this context?

  2. sicurezza says:

    Blog interessante , grazie per l’ articolo! Continua a tenerci informati.Giulio

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