This dissertation explores the general equilibrium effects induced by the presence of informal employment and housing in the context of a country undergoing urbanization, namely
South Africa. The first chapter focuses on the role of urban informal jobs in the migration decisions of rural households. It shows that these jobs can serve as a stepping stone to the formal sector, and that their regularization can lead to an increase in firms’ labour market power within that sector. This results in lower urban wages and reduced migration flows from rural to urban areas, ultimately leading to a decrease in overall economic welfare despite
productivity gains. The second chapter examines households’ location choices based on their employment
opportunities in the case of Cape Town. It shows that informal housing may represent an attractive option for poor households given its lower cost and proximity to certain employment centers — all the more so when its supply increases or when the supply of formal housing decreases, depending on the urban policies implemented. The third chapter extends this analysis by focusing on the vulnerability of informal housing units to flooding. It shows that better information about the risks involved enables poor households to adjust their location choices and housing demand, especially once climate
change is taken into account. However, the lack of investment in informal areas — in the absence of real alternatives in the housing market — constrains their capacity to adapt. In conclusion, this dissertation aims to shed light on the economic functions that informality can fulfill in emerging countries, and to demonstrate that it often constitutes a
second-best solution in the absence of adequate development policies.