Social Innovation in the Urban Informal Economy as a Mechanism for Reducing Income Inequality in Developing Countries

M. Amin; Rasyidusman Hannamara Furqan Nur; Dharma Widada

doi:10.55927/fjst.v5i5.68

Authors

M. Amin Institute of Homeland Government
Rasyidusman Hannamara Furqan Nur Lhokseumawe State Polytechnic
Dharma Widada Lhokseumawe State Polytechnic

DOI:

https://doi.org/10.55927/fjst.v5i5.68

Keywords:

Social Innovation, Informal Economy, Income Inequality, Developing Countries, Economic Inclusion.

Abstract

Income inequality in the urban informal economic sector of developing countries remains a structural challenge due to low productivity. This research aims to analyze the role of social innovation as a strategic mechanism in increasing economic capacity and reducing the income gap of urban communities. Through a qualitative approach of case studies of 40 informal economic actors, data was collected via interviews and observations for thematic analysis. As a result, the implementation of digital cooperatives and community financing systems has been proven to increase supply chain efficiency by 25% and household net income by 20%. These findings confirm that social innovation serves as a catalyst for a more equitable distribution of welfare through a decrease in internal income variance. In conclusion, this research offers a social innovation framework as a strategic instrument for policy makers in efforts to alleviate inequality in urban areas in an inclusive manner

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