The Wall Street Journal quotes CGD president Nancy Birdsall on the drawbacks of the informal sector in developing countries.
From the article:
""Economists have stressed the negative aspects of informal trade for decades. Informal businesses often don't pay taxes, and they routinely lack the capital and expertise to be as productive as big enterprises, leading to less innovation and lower standards of living. Since informal workers lack health benefits and other safeguards, they have to save more for emergencies, resulting in less casual spending that further drags down growth. Having a big underground economy "is not something to be cheerful about," says Nancy Birdsall, an economist at the Center for Global Development, a Washington think tank. "When everybody is selling apples to each other, you're not creating new wealth -- it's not a sign that things are OK.""