Size and Implication of Informal Economy in African Countries: Evidence from a Structural Model

Mehdi Abid ()

International Economic Journal, 2016, vol. 30, issue 4, 571-598

Abstract: This paper presents estimates of the informal economy in 41 African countries, including North Africa, Southern Africa, East Africa, Central Africa and West Africa during the period 2007–2013. Using a structural equation model with latent variables, the empirical results indicate that the average size of the informal economy in Africa (in% of formal gross domestic product) in 41 countries is 42.9%, 39.9% in 5 countries in North Africa, 40.02% in 11 countries in southern Africa, 43.24% in 6 countries of East Africa, 45.5% in 7 countries of Central Africa and 45.21% in 12 countries in West Africa. We suggest economic policy recommendations to solve the dilemma of the informal economy not only in the regions but also in different countries such as: identifying the causes of informality, the barriers to formalization and how to eliminate them; developing policies, procedures and institutions that can help informal activities meet market economy requirements, reforming legal systems and ensuring equal access for all; and finally, establishing affordable social benefits for workers.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:taf:intecj:v:30:y:2016:i:4:p:571-598

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DOI: 10.1080/10168737.2016.1204342

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