Determinants of the informal economy of an emerging economy: a multiple indicator, multiple causes approach

Eghosa Igudia, Rob Ackrill, Simeon Coleman () and Carlyn Dobson

International Journal of Entrepreneurship and Small Business, 2016, vol. 28, issue 2/3, 154-177

Abstract: Positing the implementation of evidenced-based policies to manage the informal economy, our paper employs, in a novel way, the multiple-indicator, multiple-cause model and primary data, to identify the determinants of the Nigerian informal economy. Building on previous literature, relevant determinants of the informal economy were constructed from participants' responses to questions designed to solicit such information. We found the factors responsible for the origin and expansion of the Nigerian informal economy to include: unemployment, a need to be autonomous/self-employed, corruption of government officials/agencies, participants' desire to pay less tax, and participants' need to survive. The greatest influence, in terms of magnitude and impacts, comes from the 'participants' need to survive' factor, followed by corruption. Our policy recommendations follow these identified factors, and recognise the positive and important role played by the informal economy. Although country-specific, our findings/recommendations may be used to inform policy in other countries with similar economic structures as Nigeria.

Keywords: determinants; informal economy; Nigeria; MIMIC approach; informal sector policies; shadow economy; emerging economies; unemployment; self-employment; corruption; taxation; survival needs. (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (11)

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