Informal trade: Insights from Phansidewa at the India-Bangladesh border

Informal cross-border trade in the Bay of Bengal region is an integral part of local economies and has many broader economic impacts. It is categorized into three types: Unregistered traders or firms that operate outside the formal economy; registered firms that evade regulations and duties, and registered firms partly evading regulations through illegal practices.

Most of the research on this topic has focused on estimating levels of informal trade. Comparatively little effort has gone into understanding why informal trade occurs in the first place. We also don’t know enough about related issues such as contract enforcement, price formations, and quality control, or how resilient informal trade is to shocks.