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This paper analyzes the role of the urban informal sector in a developing country in relation to the performance of agriculture and other rural activities on the one hand and that of urban formal sector activities on the other. It decomposes the sectors into traditional and modernizing components traceable to production and consumption linkages with the rest of the economy as well as the character of government interventions over time. The paper contrasts success cases a la Taiwan in which the overall size of the urban informal sector remains modest the modernizing sub-sector grows in relative importance and the end of overall labor surplus is reached rather early with non-success cases a la the Philippines in which rapid rural-urban migration enhances the overall size of the urban informal sector the traditional sub-sector grows relatively and the end of the labor surplus condition is substantially delayed. (authors)

V‐Goods and the Role of the Urban Informal Sector in Development