Informal economy is also known as the underground economy, or the hidden economy. Informal economy refers to those economic activities which are carried on outside the institutionalized structures of the economy. Informal economy means they are transactions not reported to the various departments. Informal economy transactions are based on cash exchanges but they may be bartered for goods or services. Informal economy activities are always performed in a way as to avoid being identified. Informal economy is based on family and community and may not expect a quick financial return.
Informal economy would include local barter, self-help networks and other activities such as light construction and repair work. Informal activity is not easy to investigate and monitor. The informal economy comprises half to three quarters of the non-agricultural labour force in developing countries. The informal economy can play a significant role in the global economy and in reducing poverty and inequality.
The informal economy is economic activities, jobs, and workers that are not regulated or protected by the state. The concept of informal economy originally applied to self-employment in small unregistered enterprises. The concept of informal economy has been expanded to include wage employment in unprotected jobs.