The Informal Sector in Developed and Less Developed Countries: A Literature Survey

The main goal of this study is two-fold: (1) to provide ageneral overview of the contributions to the literature on theinformal sector, with a special focus on the public choiceapproach; and (2) to compare these contributions across twoinstitutionally different types of countries: developed andless developed (developing and transition) countries. Thepaper focuses on the criteria used to define the informalsector, the relationship between the formal and informaleconomy, tax evasion, and public choice analysis. It isstressed throughout this paper that the distinction betweenthe two types of countries is of key importance.