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The State and the Origins of Informal Economic Activity: Insights from Kampala


Understanding the root causes of informal economic activity is crucial for the effective governance of the informal sphere. Precisely what these root causes are, however, is subject to significant debate. This article contributes to these debates by arguing that the state is central to the origin and evolution of informality. Stressing the importance of understanding informality through a historically rooted political economy approach, it analyzes the modern history of informal vending in Kampala, Uganda, and identifies six ways in which the state has fundamentally shaped informal economic activity in the city: colonial planning, a history of poor governance and instability, economic liberalization, geographic development trends, an ineffective taxation regime, and the self-interest of state officials. An appropriate understanding of the centrality of the state in the informal economy highlights the necessity of designing effective institutions, policies, and interventions that prioritize the needs of the urban poor.

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  1. Each of these views is explored in the subsequent section of this paper.

  2. For various treatments of the literature on informal economic activity, see Carr and Chen (2001), Chen (2012), Gërxhani (2004), Habib-Mintz (2009), Losby et al. (2002), Rakowski (1994), and Yusuff (2011).

  3. Habib-Mintz (2009). For the similarities between Marxist and more orthodox approaches to the role of the informal sphere in the political economy of development, see Portes and Sassen-Koob (1987).

  4. For a critique of the importance of colonial heritage in the politics of vending, see Morange (2015).

  5. Also see Carbone (2008, 63–76).

  6. The World Bank (2015b, 6).

  7. The World Bank (2015a, 106).

  8. Collier and Reinikka (2001, 37). Total number of public enterprises taken from Carbone (2008), 53. For this process, see Tangri and Mwenda (2001).

  9. Collier and Reinikka (2001), 27. Carbone (2008, 54) claims this decline took place in “less than five years.”

  10. For the argument that liberalization can have negative short-term effects followed by positive long-term effects on the labor market, see Bacchetta et al. (2009).

  11. The UN elsewhere puts the former at 4.8% and the latter at 29.9% (2015, 467 and 433), while the World Bank claims the latter is 35% (2015b, 33).

  12. Figures for the Kampala urban agglomeration.

  13. Interview, Member of Parliament, Parliament of Uganda, 27 July 2015.

  14. The value of the Ugandan shilling fluctuated between approximately 3619 and 3884 UGX to USD throughout 2018.

  15. Figure taken from Ladu (2015a). Also see; Akol (2015); Busuulwa (2015); Uganda National Chamber of Commerce and Industry (2015); and Tentena (2015).

  16. Interview, KACITA representative, 11 July 2015.

  17. Interview I, shop vendor, 17 August 2015.

  18. Interview II, shop vendor, 17 August 2015.

  19. Group interview, shop vendors, 8 July 2015.

  20. Ibid.

  21. Interview I, Owino Market vendor, 9 July 2015.

  22. The World Bank (2018a). Figures for starting a business taken from page 6.

  23. Interview, KACITA representative, 11 July 2015.

  24. Interview, PSFU representative, 20 July 2015.

  25. Interview, KACITA representative, 11 July 2015.

  26. Group interview, street vendors, 8 July 2015.

  27. Group interview, URA, 11 August 2015.

  28. Interview, KACITA representative, 11 July 2015.

  29. A similar point in made in Anjaria (2006).

  30. Interview, Member of Parliament, Parliament of Uganda, 27 July 2015. The ownership of matatus is also discussed in Goodfellow (Goodfellow 2012, 17–18).

  31. This phenomenon has been observed elsewhere, perhaps most notably in Latin America. See, for example: Cross (1998); and Holland (2016, 2017).


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Young, G. The State and the Origins of Informal Economic Activity: Insights from Kampala. Urban Forum 30, 407–423 (2019).

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  • Informal economy
  • Informal vending
  • State power
  • Governance
  • Kampala
  • Uganda