The Urban Popular Economy and Informal Sector Production

Abstract

The primary purpose of this paper is to present a method of analyzing one aspect of the growing inequity in the distribution of income in many developing countries--the situation of people living in very low income "squatter communities" in the urban areas of a large number of such countries. The method consists of treating such communities (which are called popular economies in this paper) as semi-autonomous units amenable to analysis by a two-gap type growth model. The paper also indicates how such an analysis can be used as a basis for predicting the growth of "informal sector activities" serving the popular economy. While these methods are intended to be generally applicable, much of this paper is devoted to the application of the methods to a particular example of the popular economy in Nairobi, Kenya. Because of the differences between popular economies in different areas and countries, this analysis is designed to illustrate the usefulness of the methods of analysis and to present results for one example of the popular economy rather than to search for general conclusions. Following the presentation of these results, some comments upon possible wider uses for the popular economy construct are presented.