LABOUR MARKETS, INFORMALITY, AND STRUCTURAL POVERTY IN DEVELOPING ECONOMIES: AN INTEGRATIVE ANALYTICAL MODEL

Abstract

This study examines the interconnected dynamics of labour markets, informality, and structural poverty in 
developing economies through an integrative analytical framework. Drawing on labour market segmentation and 
dual economy theories, the study synthesises existing literature to analyse how structural labour divisions, 
productivity disparities, and institutional weaknesses jointly shape poverty outcomes. The findings reveal that 
informality is not merely a residual employment category, but a systemic feature reinforced by segmented labour 
markets and limited absorption of surplus labour into formal sectors. The analysis further shows that informal 
employment contributes to persistent poverty through income instability, lack of social protection, and restricted 
upward mobility. These effects are compounded by productivity gaps between formal and informal sectors, which 
sustain wage inequality and limit economic advancement. Institutional factors, including weak governance and 
ineffective labour regulation, are identified as critical to the persistence of informality and to the constraining of 
policy effectiveness. The study develops an integrated analytical model that captures the dynamic interactions 
between labour segmentation, informality, productivity, and institutional quality. By bridging fragmented theoretical 
perspectives, the model provides a comprehensive explanation of poverty reproduction in developing contexts. The 
findings highlight the need for multidimensional policy approaches that combine labour-market reforms, expanded 
social protection, and institutional strengthening to address structural inequality and promote inclusive economic 
development.