The formal–informal dichotomy: Revisiting the debate on the agriculture– industry linkage

Abstract

Incorporation of the informal sector in the general Kaleckian framework of agriculture– industry linkage is the primary target of this article. We show that the agriculture– informal sector interaction is distinctly different from the agriculture–formal sector relationship. Although agriculture supports the formal sector only from the supply-side, it helps the informal sector by providing both demand- and supply-side inducements. Next, contrary to the general perception of formal–informal complementarities, we rather propose a fundamental conflict. This conflict arises in the presence of the food supply-constraint or the generic resource-constraint. Subsequently, with these theoretical perspectives, we show that policies that are beneficial for the formal sector, in fact, constrict the informal economy