Social Economy and Innovation

Addressing informality through the social economy


Addressing the informal sector has the potential to foster long-term growth and encourage business formalisation, averting adverse economic and social outcomes like reduced tax revenues and unfair competition. 

  • What's the issue?

Evidence shows that informality might provide jobs, income and a safety net for workers. However, at high levels, informality results in reduced productivity, a decline in both the Human Development Index and GDP indicators, and an increase in poverty. Informality can act as a barrier to longer-term growth, competitiveness, and business formalisation. It has broader and significant economic and social consequences such as lower tax revenues, limiting the scope for government expenditures, including for social protection systems. High levels of informality create additional challenges to the formal sector through unfair competition, which can discourage investment and businesses growth, since informal businesses need to stay small to evade enforcement agencies.

Addressing informality requires novel multidimensional strategies that integrate a range of policies. Supporting social and solidarity economy (SSE) development can contribute to this effort. SSE models are built around a holistic approach to human and economic development that promotes people over capital and fosters socio-economic initiatives that strengthen co-operation and social cohesion. SSE organisations typically facilitate access to training, formal work, property, information and equitable distribution of benefits to their members as well as collective enterpreneurship. The promotion of conducive and tailored SSE ecosystems can significantly help unleash the social and solidarity economy’s full potential for addressing informality and its impacts, and provide solutions to support the transition from informality to formal activity and work in many sectors.


  • What can the OECD offer?

The OECD has pioneered work and significantly expanded practical knowledge on the social economy, social enterprises and social innovation for over two decades. Our work has since demonstrated the major role that the social economy plays in local job creation, social inclusion, economic growth and the green transition.

The OECD can support cities, regions and countries in implementing their strategic priorities in the area of formalisation of workers through social and solidarity economy models. 




  • Tackling informality in Colombia with the social and solidarity economyRead more


Recent reports

  • From informal to formal jobs: The contribution of cooperatives in Colombia
    Read the report

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