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Informal sector dynamics in times of fragile growth: The case of Madagascar

Julia Vaillant (), Michael Grimm, Jann Lay () and Francois Roubaud ()

The European Journal of Development Research, 2014, vol. 26, issue 4, 437-455

Abstract: This article examines the dynamics of the informal sector in Madagascar during the 1995–2004 period, which was characterized by sustained growth that ended due to a major political crisis. As conventionally assumed by simple dualistic models, the informal sector indeed fulfils a labor-absorbing function in times of crisis. However, informal business creation was also a major trend both during macroeconomic growth and during crisis and recovery. Growth in the informal sector was mostly extensive, with little job creation or capital accumulation. Although such a situation would be consistent with the existence of poverty traps, estimated marginal returns to capital are decreasing, which tends to reject this hypothesis.

Date: 2014
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Related works:
Working Paper: Informal Sector Dynamics in Times of Fragile Growth: the Case of Madagascar (2014) Downloads
Working Paper: Informal Sector Dynamics In Times Of Fragile Growth: The Case Of Madagascar (2011) Downloads
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