The informal economy plays an important role in most middle income countries. Informal economic activities are characterized by low levels of technology and jobs with low levels of skills and productivity. Informal institutions governing relationships in the informal economy, and formal institutions such as laws and regulations often limit incentives and options of micro- and small enterprises to diversify, to switch into higher value added products and to grow. In other words, institutions in middle income countries often reflect low social capabilities for productive transformation.
This challenges governments to integrate the informal economy into a national strategy of productive transformation, and to design formal institutions and upgrade informal institutions that support structural transformation and technological advancement in the informal economy, and help enterprises to move from the informal to the formal economy.
Four presentations provide findings of ILO research on the role of formal and informal institutions in promoting formalization and productive transformation in the informal economy.

Workshop on "Boosting economic dynamics and job growth: the potential of industrial policies" organized by the ILO and the Geneva Office of the Friedrich Ebert Foundation (FES) 4-5 March 2013.