The Informal Economy in Sub-Saharan Africa: Size and Determinants

Leandro Medina (leandrom@gwu.edu), Andrew Jonelis and Mehmet Cangul

No 2017/156, IMF Working Papers from International Monetary Fund

Abstract: The multiple indicator-multiple cause (MIMIC) method is a well-established tool for measuring informal economic activity. However, it has been criticized because GDP is used both as a cause and indicator variable. To address this issue, this paper applies for the first time the light intensity approach (instead of GDP). It also uses the Predictive Mean Matching (PMM) method to estimate the size of the informal economy for Sub-Saharan African countries over 24 years. Results suggest that informal economy in Sub-Saharan Africa remains among the largest in the world, although this share has been very gradually declining. It also finds significant heterogeneity, with informality ranging from a low of 20 to 25 percent in Mauritius, South Africa and Namibia to a high of 50 to 65 percent in Benin, Tanzania and Nigeria.

Keywords: WP; GDP; economic activity; estimation; Informal economy; MIMIC estimation methods; Sub-Saharan Africa; mimic approach; informal economy activity; phrase informal economy; model estimation result; informal economy growth; Labor force participation; Personal income; Currencies; Unemployment rate (search for similar items in EconPapers)
Pages: 31
Date: 2017-07-10
References: Add references at CitEc
Citations: View citations in EconPapers (43)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=45017 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2017/156

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi (amodi@imf.org).