The phenomenon of informal trade as a factor impacting formal traders

Abstract

Informal commerce in any modality has become in underdeveloped economies an escape valve for the lack of employment and the most practical way to generate income, therefore it is a very evolutionary global problem, which generates constant concern in governments to improve employment and productivity indexes through formalization, this is how in Latin America and other regions of the world informal activities are an important source of employment. A descriptive methodology with a quantitative approach was used to characterize 209 formal commercial establishments, to analyze the socioeconomic aspects and the causes of informality, and to determine the degree to which informal commerce affects formal traders, through a survey directed to a sample of 209 formal traders and 251 informal traders of the public market shopping center in the city of Ocaña, and subsequently the information collected was analyzed by means of graphs. The results showed that formal traders partially comply with the legal requirements for setting up their businesses, and it was also identified that 70% of them are affected by informal activities that offer products at lower prices because they do not pay taxes, rents, utilities and administration costs. Finally, it was concluded that informal commerce affects the income level of formal merchants because they captivate clients with lower prices and generate visual and auditory affectation and contamination from garbage.