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The informal sector’s contribution to the economic wellbeing of people in Timor-Leste

It is widely believed that the informal sector is growing in the modern global economy. When studying who occupies this informal sector and the nature of their business, the universal tendency is to describe the informal sector as made up of low-income producers and having opportunities for disadvantaged and low-quality sectors to run their businesses. The informal sector business has long been seen as marginalized groups working as subordinates because of economic needs and as a last resort. This thesis empirically analyses the features and characteristics of the informal sector in Timor-Leste and is made up of three connected studies. In the first study, in Chapter 2, the factors associated with being an informal sector work were identified. The results show that women rather than men dominate the informal sector. Moreover, there is a gender dimension in informal sector economic activities. Women are more interested in small trading activities, such as retail kiosks and weaving, that are attached to homes. Men mostly perform economic activities, such as mining and construction, outside the home. The informal sector is also dominated by uneducated people. The high level of involvement of illiterate people in the informal sector creates the potential for negative consequences. The second study, in Chapter 3, investigated the relationship between informal sector work and the income security, food security, and self-reported health. The only statistically significant relationship was with income security, where informal sector work was associated with lower income security. The relationships between informal sector work and food security and health were not statistically significant. The importance of improving income security among informal sector workers was clear. The third study, in Chapter 4, qualitatively investigated factors preventing informal sector development from the informal sector workers’ perspective. The thematic analysis demonstrated that most of the less educated informal sector actors do not have the expertise and knowledge to manage the minimal resources they have. This limited knowledge prevents them from gaining access to initial capital, markets, and other resources. Another factor is the lack of knowledge in managing capital. Most informal sector workers were unable to adequately manage their capital cash flow. The lack of skill in handling capital is a severe issue for developing their business. In addition, the unavailability of basic infrastructure further hindered the development of the informal sector. This thesis assesses contributions to the informal sector in which most people play a role in job creation, income generation, livelihood improvement, and living standards despite it still being far from their expectations. Overall, the findings of empirical research in this thesis clarifies issues related to the informal sector. The policy implications of this work include providing a supportive environment by simplifying business-related regulations and procedures, and ensuring that there is easier access to credit. A supportive business environment will stimulate new entrepreneurs to start businesses, and thus provide job opportunities, not only for themselves but for other people as well. Also, the finding of this thesis indicated that women and the uneducated are more likely to engage in informal sector work. Hence, policies could usefully be targeted at supporting women and uneducated people. In turn, their businesses will develop as a form of supporting the household and national economy.
Type of thesis
The University of Waikato
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