The informal economy and the reach of policy interventions: Evidence from the COVID-19 lockdown in India

This essay examines the influence of the informal economy on the reach of government interventions in public health crises. It reports the results of an analysis of the self-reported suspension of business operations during the pandemic, as well as a district-level analysis of the changing patterns in community movement in response to the lockdown in India in March 2020. We find that informal establishments were less likely to suspend their operations and that the prevalence of the informal economy weakened the behavioral response of the communities to social distancing measures. In addition to bringing to light an understudied facet of the societal response to the COVID-19 pandemic, this result demonstrates the importance of economic institutions for understanding public governance.