Making sense of informal economies in fragile contexts: Issues, dilemmas and questions

Clingendael CRU and Knowledge Platform Security& Rule of Law

Increased attention for job creation, private sector development and illicit financial flows in fragile contexts has rekindled policy interest in the phenomenon of economic informality. Yet, conventional responses to informal economies may not be suitable for fragile situations due to the particular challenges posed by the dynamics of fragility and conflict. International development actors therefore need to recalibrate intervention strategies geared toward addressing economic informality in fragile contexts. This also requires them to look beyond the economic dimension of informal economies and pay attention to the political and social undercurrents that sustain patterns of economic informality in fragile environments. Development actors are also confronted with a number of dilemmas about the appropriate level of engagement with the informal economy, the envisaged role for the state, the development potential of informal economies, and hybrid forms of economic governance. Finally, important questions about the manner in which informal economies shape governance, development and conflict patterns in fragile environments remain to be addressed.

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