Informal Economy Law and Legal Definition

Informal economy refers to activities and income that are partially or fully outside government regulation, taxation, and observation. It includes barter of goods and services, mutual self-help, odd jobs, street trading, and other such direct sale activities.

Income generated by the informal economy is usually not recorded for taxation purposes, and is often unavailable for inclusion in gross domestic product (GDP) computations. The informal economy activities allows employers, paid employees, and the self-employed to increase their take-home earnings or reduce their costs by evading taxation and social contributions.