The informal sector has become an inherent fact in urban areas, especially in developing countries (Henley et al., 2009). This sector has interests for at least three reasons; in a response to poverty and unemployment, as incubators of business opportunities and stepping stones to formal economic accessibility and as absorbers of the majority of the workforce (Nguimkeu, 2014). There is about 30-70% of the workforce population in urban developing countries, work in the informal sector (Bappenas, 2009). The Overall from ILO (2009) and UN-Habitat (2006) mention that 60-90% of jobs exist in the informal sector (Nguimkeu, 2014). Therefore, some researchers have highlighted the benefits of informality based on the three reasons above and made it an important part of social and economic studies (Rothenberg et al., 2016).
Like most of third world countries, the informal sector in Indonesia accounts for a large proportion of total employment (Suharto, 2002). Majanto's study shows that most of Indonesian workers (65.4%) in 1998 attempted in the informal sector. This condition puts Indonesia as one of the countries that have the largest informal sector in the world. According to the business field or main occupation, the informal sector role is much higher than the formal sector. This applies in agriculture, forestry, labor, fisheries and in the field of large trade, retail, and restaurant. Such conditions have not experience significant changes in 2002 because the role of the informal sector was much higher than the formal sector in the same business field (Majanto, 2002).
The contribution of the informal sector to the real economy places it as a reality of peoples economy that plays an important role in community development and development in Indonesia (Haris, 2011; Wauran, 2012). This is indicated by the ability of this sector to survive from the impact of the economic crisis in 1999 until now. In addition, the informal sector survives and is able to rise from economic downturns when hit by a crisis (Anggraini & Nasution, 2013) and also disaster (Firdaus, 2014). If the development programs were not capable to provide employment opportunities for the workforce, the informal sector with all its shortcomings can act as an economic rescue valve and alternative employment opportunities for job seekers (Wauran, 2012). However, the studies on the informal sector have so far shown that there is no specific approach taken by government and private institutions in efforts to strengthen the informal sector.
Nevertheless, the Solo City experience in managing the informal sector is an exception. The government intervention through regional regulations and implemented through market physical development and the arrangement of small traders has changed the system of values and attitudes of street vendors, organizational culture and informal sector participations (Wirutomo, 2011). The development practice by government institutions through its policies in the city of Solo is a reference for the author's argument in this article. The author argues that government and private institutions are very influential in determining the success of strengthening the informal sector in traditional markets. Therefore, the institutional approach is very important in efforts to strengthen the informal sector in traditional markets, especially in developing countries. By using institutional approach, in this article we purpose the strengthening strategies of the informal sector in traditional market. For the objective, we mapping and explain the main issues faced by the informal sector in traditional markets. And then, we discuss the institutional approaches that can be used to address these key problems.
Market & Institutional Approach
As a root of their study, political science defines institutions as anything formal such as parliament and law, including markets (Peters, 1999). In a broader framework, institutions are not only understood as a formal structures (March & Olsen, 1996). North defines institutions as any form of constraint that human beings devise to shape human interaction (Portes, 2010; Saikia & Bhaduri, 2012). The coverage of the North institutional concepts relating to formal aspects (a legislature, an agency in the public relations, or a legal framework) and informal aspects (a network of interacting organizations, or a set of shared norms) (Saikia & Bhaduri, 2012). Similar to the view of political science, sociological approaches tend to associate institutions with organizations (Meyer, 2010; Peters, 1999). Sociologists view that human social life is embedded with institutions (Jepperson, 1991; Meyer, 2010), therefore the institutional theory in sociological approach has an interest in how phenomena is spread in the field and form an isomorphic field, and often add the political economy to its analysis (Fligsten & Dauter, 2007).
Although it's very different from organizations, the institutional theory approach gets a broad place in studies that are related to institutions, both formal and informal (Abrutyn & Turner, 2011). Several studies discussing how institution fluencies various sectors, such as industries (Segawa et al., 2014), health (Fitriati & Rahmayanti, 2012), enterpreneur & gender (Warnecke, 2013), social capital (Huysseune, 2003; Rothstein & Stolle, 2003), transportation (Daraba et al., 2018), an also market (Ding & Akoorie, 2009; Saikia & Bhaduri, 2012). These studies as a whole explain that formal and informal institutional interventions (institutions, rules, norms and agreements) for the various sectors that are the subject of their studies. These studies show that the institutional role has a major influence on the sectors that are being intervened. However, there are limited studies that discussed the role of institution related to strengthening of informal sector, especially at traditional market.
In this article, we pointed the market as institution (Zakariya et al., 2016) where social processes also take place between various economic actors and non-economic actors converge (Ahrne et al., 2015; Fligstein, 1996) for various purposes (Swedberg, 1994). In addition, the institutional approach put the...