Estimating the Size and Dynamics of Informal Economy in the Southern African Development Community (SADC) Countries: A Theoretical and Empirical Approach

S. Benson Simwanza

MPRA Paper from University Library of Munich, Germany

Abstract: This paper uses a two-sector dynamic general equilibrium model that deterministically accounts for the trends among time-series variables to estimate the size of the informal economy for 15 Southern African Development Community (SADC) countries from 1990 to 2019. Among the countries, Mauritius, on average, maintains the smallest informal economy at 23 percent of GDP, followed by South Africa, averaging 25 percent of GDP, while the largest informal economies as a percent of GDP are Zimbabwe and Tanzania at 60.8 percent and 53 percent, respectively. In addition, this paper explores the determinants of this informal economy measure using a panel vector autoregressive model (PVAR), and the nonlinear relationships among dependent variables from the impulse-response functions show that, on average, countries with larger real GDPs, higher levels of control of corruption, higher regulatory barriers, and higher levels of economic freedom have smaller informal economies. While countries with higher tax burdens, on average, exhibit increasing informal economies. Hence, this confirms the dynamics of informality vary across SADC countries, and their governments should relax some restrictions, enforcements, and projections based on the dynamics of the informal sectors.

Keywords: : Informal economy; DGE models; PVAR; SADC countries (search for similar items in EconPapers)
JEL-codes: C33 E26 E32 (search for similar items in EconPapers)
Date: 2025-03
References: Add references at CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/123842/1/MPRA_paper_123842.pdf original version (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:pra:mprapa:123842

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().