Basic-needs social protections and own-account informal entrepreneurship: implications for policy and cross-national comparative analysis

Despite the vast number of people operating own-account informal ventures worldwide, few studies have adopted a cross-national comparative lens to advance an integrative, contextual explanation of where this type of self-employment will be the largest and most significant. To fill this gap, we build on multiple research traditions to compare and contrast three theoretical explanations for the wide cross-national variation in the size of own-account informal sectors: a country’s level of economic development, its ability to provide basic-needs social protections coverage to its citizens, and the quality of its rule of law. Our cross-national comparison of 107 country cases offers empirical support for the economic development and social protections perspectives but not for the rule of law. Our results also find that the explanatory power of basic-needs social protection coverage increases in lower-income countries, which supports the inclusion of a welfare-based perspective in the general comparative toolkit for understanding why and how informal economies differ across the developing world. The discussion section examines the benefits of conceptually and empirically integrating multiple paradigms to evaluate the effectiveness of policies and practices to help society’s most vulnerable members who live and work in the largest own-account informal sectors across the world.