IMPACT OF THE INFORMAL ECONOMY ON DEVELOPMENT. What is the informal economy? Simply put, the informal economy refers to those economic activities that are neither taxed nor monitored by a government and are therefore not included in that government's Gross National Product (GNP). However in the literature this phenomenon is discussed using different concepts such as informal, unofficial, irregular, parallel second underground, underground, gray markets, underground, hidden, invisible, unregistered, shadow, ghosting and moonlighting. Illegal or criminal activities such as drug dealing or prostitution, as well as exchanges of unpaid work, were excluded from this definition. My article is therefore prepared with this omission in mind. Introduction “In many developing countries, unofficial economic activity (that conducted by unregistered companies or by companies registered but hidden from taxation) represents between a third and half of the total. This share decreases dramatically as the economy develops. Despite the vastness of this unofficial activity, little is understood about its role in the economic development process, and in particular how important “officializing” these hidden resources may be for economic growth.” (Rafael La Porta and Andrei Shleifer pg 1) Role of the informal economy in developmentA recent transnational report presented by the authors Rafael La Porta and Andrei Shleifer, which appeared in the Brookings Papers in August 2008, aims to improve understanding of the relationship between economic development and the informal economy. The report distinguishes between three alternative visions of the role of the informal economy in development. The romantic view: According to this view, informal businesses are actually or potentially extremely productive and are held back by government taxes and regulations, as well as a lack of secure property rights and access to finance. While waiting for the necessary legal reforms, “four billion people around the world are deprived of the opportunity to improve their lives and escape poverty, because they are excluded from the rule of law” (United Nations, 2008, page 1). If barriers to bureaucracy are lowered and capital is provided through microfinance, unofficial businesses will register, take out loans, take advantage of other benefits of official status, and, in so doing, expand and stimulate economic growth. The key aspect of this optimistic view is that unofficial enterprises are fundamentally similar to official ones, but held in check by politics. In particular, unofficial enterprises should appear similar to official enterprises with respect to characteristics not influenced by government policies, such as the characteristics of entrepreneurs (and.