Abstract
Rapid urbanization has seen a concurrent growth of informal economies, which play an important role in alleviating urban unemployment and poverty. Following international efforts to integrate divergent theories on informality, this paper examines the causes of urban informal economies in China by deploying a panel data regression model that considers multiple explanatory factors informed by these theories. Our estimation based on the latest China Population Census shows that the size of urban informal employment in China reached 215 million and 22% of gross domestic product (GDP) output share was from urban informal economies. Our model reveals that the causes of urban informal economies in China are mainly associated with the stages of economic development, tertiarization of industries, unemployment, rural-to-urban migration, and globalization of urban economies. This paper adds evidence from the Chinese context to the emerging argument that informal economies cannot be fully explained by each mainstream informality theory, suggesting that these theories should be seen as complementary rather than opposing alternatives. The paper concludes with policy implications for urbanization in China.
Highlights
The prevalence of informal economies across the globe has received continual attention over the past decade [1,2]
The informal economy contributes to sustainable development because of its role in alleviating unemployment and poverty and promoting local economies [4,5,6,7]; on the other hand, it is seen as a sign of underdevelopment and unsustainability given the nature of poor working conditions and precarity in informal employment [8,9,10]
It was found that the emergence and dynamics of Chinese urban informal economies are mainly associated with the stages of economic development, tertiary industries, unemployment, rural-to-urban migration, and the globalization level of economies in terms of foreign direct investment (FDI) used and international trade volumes
Summary
The prevalence of informal economies across the globe has received continual attention over the past decade [1,2]. This paper aims to engage with a burgeoning literature that draws attention to the dynamics and causes of the informal economy and provide policy implications for the development of urbanization in China. The present study aims to contribute to existing literature by constructing a quantitative model that considers the multiple explanatory factors highlighted by the above-mentioned theories and applying this model to examine the causes of informal economies in urban China. We suggest that these theories are neither contradictory nor alternative to one another but are complementary in understanding the development of informal economies within a specific context.
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