Institutions And Economic Development: Informal Economy In Algeria

Since 1990, Algeria has implemented several economic reforms in order to improve the performance of the economy, and thus reach high growth levels. However, most of these reforms were not accomplished or even worse had led to other economic and social problems, such as unemployment, poverty, smuggling, tax evasion, etc. All these activities are gathered in one inclusive concept, which is the informal economy. Moreover, among the main drivers and the causes of this economy are the state formal regulations on economic activities. But what are of paramount importance are informal institutions, such as informal rules and social norms that are deep-rooted in the society’s culture and are influenced by historical patterns, and thus take too much time to be changed. The emphasis of this paper will be on the impact of informal institutions on economic outcomes, and that the government should take into account social norms as well as the formal institutions in order to reduce the costs of the transition process toward the market economy, such as the rising size of informal activities, etc.