(DP 1978-11) The Informal Trade Sector in the Greater Manila Area

Abstract

The first part of this paper presents some of the salient features of the informal trade sector in Greater Manila Area. It is rather sketchy because to describe the sector more thoroughly implies that the inter-relation of the observed characteristics of the sector has already been unraveled. But the regularity of such interrelations failed to emerge from the more common exercise of estimating production functions for the sector. Such disappointing results are mentioned in the text but no longer discussed. A different approach is presented in the fourth section of the paper. A model of the informal trade sector is developed to explain why no systematic, i.e. statistically significant, relationship between value added per enterprise, for example, and supply variables like value of fixed assets, capacity utilization rates, etc. could be found. More importantly, the model is developed to help one understand the behavior of the informal trade sector. The latter part of this section confronts the model with data on the sector and the conclusion that seems to emerge is that the model indeed captures the essential characteristics of the sector. The last section builds on the findings in the preceding sections to lay the foundation for some rather tentative policy prescriptions for the sector. Lastly, the appendix suggests a possible way of using informal trade sector data as indicator of changes in personal income distribution. Lastly, the appendix suggests a possible way of using informal trade sector data as indicator of changes in personal income distribution.