Determinants of Informal Sector Labour Demand: An Application of Alternative Methodological Approaches to South Western States of Nigeria

Abiodun Folawewo

Applied Econometrics and International Development, 2006, vol. 6, issue 2

Abstract: Informal sector labour demand is analysed using a matched employer-employee data set obtained from a survey of informal enterprises in South-western Nigeria. Two different methodological approaches are used: conventional Ordinary Least Squares (OLS) and Instrumental Variable (IV) estimation techniques; and a Probit model is estimated to determine the probability of employees’ absorption by firms. While the former shows that informal sector’s labour demand is subject to firms’ optimisation behaviour, the latter indicates that labour demand decision is based on employers’ preference for discrimination. The paper argues that the importance of different factors in the determination of informal sector labour demand depends on the methodological approach.

Keywords: Labour Demand; Urban; Informal Sector; Waged-Labour; Efficiency Wage Model. (search for similar items in EconPapers)
JEL-codes: J23 O17 O18 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (1)

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