Abstract
Governance of the informal economy, especially of the informal marketplaces has attracted
considerable attention in the recent decades. This paper contributes to this literature by
arguing that conception of the informal economy is an empirical reality is shaped by the
formal governance structure. The development of informal governance institutions for
governance of informal marketplaces and their role in local governance are shaped by the
design of formal institutions. Beyond simplified dynamics of enforcement related to taxation,
and incentive structure shaped by electoral politics, governance of informal marketplaces is
rooted in the ‘deep governance structures’. This article asks: How formal governance
structure, shape the emergence of informal governance institutions in marketplaces that are
informal? And, if taxation is not the defining feature of linkage to local government
institutions, in what ways informal marketplaces impact on the local governance of their
respective regions? To answer this question, this article draws on a wide range of literature
on the informal economy, marketplaces, and informal traders associations-local government
interface. It presents original empirical findings from an ethnographic study conducted in
Batkhela bazaar, Pakistan. The contributions of this paper are two-fold. First, it shows the
relevance of informal marketplaces and their traders associations to formal governance
structure, a subject that is hardly investigated in the context of Pakistan. Second, it
demonstrates, beside electoral politics, the dynamics of powers links these marketplaces to
local political actors with implications for formal governance of the region.