Answer to Question #108383 in Economics for kenzie

Question

What is the role of the government, consumers, and producers in the informal sector?

Answer 1

The government is indirectly interested in existing of the informal sector because these small enterprises give workplaces, sources for household expenditures. But at the same time governments spend money on the restriction on the informal sector. Consumers buy products of shadow economy enterprises and support them in this way. Producers are forced to compete with shadow firms, and this may reduce producers incomes.