Informal markets in developing countries

Examining the importance of personalized interchanges between transactions in developing countries, Jagannathan here argues for the need to refashion the paradigms which underly theories of development by highlighting the importance of informal institutional arrangements in production and exchange. For most of the poor in developing countries, he maintains, wealth often exists in the form of regular behavioral relations that acquire the characteristics of informal property rights. Using the concepts of positive economics, he explains how informal contracts are put to productive and unproductive use. This analysis raises several important policy issues for social scientists interested in economic development.