Signals and Policies Required for Informal Markets: Evidence from Egypt & China

Abstract

This paper is investigating the informal market in Egypt and China. First, it will go through the main concept of informal markets and the four main schools of thoughts, then the history of informal sector in Egypt and China since the 1970s' and the causes and effects of such phenomena. Also, it will go through the effect of informal sector on economic growth of a country and the characteristics of informal sector in any country. The paper suggests some solutions to overcome the problems of informal sector. The paper concluded that there are negative relation between informal sector and economic growth, and that developing countries often have bigger informal sector than developed countries and the poverty and unemployment play vital role in determining the size of the informal sector in an economy.