IDEAS home Printed from https://ideas.repec.org/a/wly/sustdv/v33y2025i1p478-492.html
   My bibliography  Save this article

How does globalisation affect informality in sub‐Saharan African countries?

Author

Listed:
  • Munacinga Simatele
  • Segun Thompson Bolarinwa

Abstract

This paper examines the intricate informality‐globalisation nexus in the sub‐Saharan African context using 30 African countries. Using the Method of Moments Quantile Regression approach (MM‐QR), this study analyses the nexus using three measures of globalisation: overall, economic and trade globalisation. Furthermore, the mediating role of institutional quality is explored using five dimensions of institutional quality. The empirical results confirm a negative relationship across different measures of globalisation and different quantiles, signifying that increased globalisation tends to suppress informal economic activities. Moreover, the interactive models of globalisation and institutional quality also validate the negative relationship in the nexus. The investigation into the dimensions of institutional quality underscores their importance in shaping informality dynamics. The ‘law and order’ dimension demonstrates a notable role in reducing informality, emphasising the significance of robust legal frameworks and effective governance structures in fostering formal economic activities. Simultaneously, the adverse impact of corruption on informality highlights the need for concerted efforts to combat corruption for the sake of encouraging formalisation and economic development. By utilising the Method of Moments Quantile Regression method, this paper offers a nuanced perspective that considers variations across different segments of the informality distribution. This approach enhances our understanding of the heterogeneity in the effects of globalisation and institutions on informality within the African context. In conclusion, this paper advances the discourse on the informality‐globalisation nexus by incorporating the mediating influence of institutional quality. The findings underscore the multifaceted nature of the relationship and emphasise the need for holistic policy interventions that address both globalisation and institutional dimensions. By shedding light on the intricate web of factors impacting informality, this study provides a foundation for evidence‐based strategies aimed at sustainable economic development and inclusive growth across African nations.

Suggested Citation

  • Munacinga Simatele & Segun Thompson Bolarinwa, 2025. "How does globalisation affect informality in sub‐Saharan African countries?," Sustainable Development, John Wiley & Sons, Ltd., vol. 33(1), pages 478-492, February.
    • Handle: RePEc:wly:sustdv:v:33:y:2025:i:1:p:478-492
    DOI: 10.1002/sd.3133
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/sd.3133
    Download Restriction: no
    File URL: https://libkey.io/10.1002/sd.3133?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Andrei A. Levchenko, 2013. "International Trade and Institutional Change," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(5), pages 1145-1181, October.
    2. McMillan, Margaret & Rodrik, Dani & Verduzco-Gallo, Íñigo, 2014. "Globalization, Structural Change, and Productivity Growth, with an Update on Africa," World Development, Elsevier, vol. 63(C), pages 11-32.
    3. Sami Bensassi & Anne Brockmeyer & Mathieu Pellerin & Gaël Raballand, 2017. "Algeria–Mali trade: the normality of informality," Middle East Development Journal, Taylor & Francis Journals, vol. 9(2), pages 161-183, July.
    4. Yuriy Gorodnichenko & Jan Svejnar & Katherine Terrell, 2010. "Globalization and Innovation in Emerging Markets," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 194-226, April.
    5. Machado, José A.F. & Santos Silva, J.M.C., 2019. "Quantiles via moments," Journal of Econometrics, Elsevier, vol. 213(1), pages 145-173.
    6. Rajeev K. Goel & Rati Ram & Friedrich Schneider & Ashley Potempa, 2020. "International movements of money and men: impact on the informal economy," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 44(1), pages 179-197, January.
    7. Dabla-Norris, Era & Gradstein, Mark & Inchauste, Gabriela, 2008. "What causes firms to hide output? The determinants of informality," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 1-27, February.
    8. Danquah Michael & Schotte Simone & Sen Kunal, 2021. "Informal work in sub-Saharan Africa: Dead end or stepping-stone?," IZA Journal of Development and Migration, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 12(1), pages 1-44, January.
    9. Hopper, Trevor & Lassou, Philippe & Soobaroyen, Teerooven, 2017. "Globalisation, accounting and developing countries," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 43(C), pages 125-148.
    10. Aziz N. Berdiev & James W. Saunoris & Friedrich Schneider, 2018. "Give Me Liberty, or I Will Produce Underground: Effects of Economic Freedom on the Shadow Economy," Southern Economic Journal, John Wiley & Sons, vol. 85(2), pages 537-562, October.
    11. Kate Meagher & Laura Mann & Maxim Bolt, 2016. "Introduction: Global Economic Inclusion and African Workers," Journal of Development Studies, Taylor & Francis Journals, vol. 52(4), pages 471-482, April.
    12. Segun Thompson Bolarinwa & Munacinga Simatele, 2023. "Informality and poverty in Africa: Which comes first?," Sustainable Development, John Wiley & Sons, Ltd., vol. 31(3), pages 1581-1592, June.
    13. Stein, Howard, 1992. "Deindustrialization, adjustment, the World Bank and the IMF in Africa," World Development, Elsevier, vol. 20(1), pages 83-95, January.
    14. Meagher, Kate & Manna, Laura & Bolt, Maxim, 2016. "Introduction: globalization, African workers and the terms of inclusion," LSE Research Online Documents on Economics 66276, London School of Economics and Political Science, LSE Library.
    15. Phuc Van Nguyen & Duc Hong Vo & Toan Pham-Khanh Tran & Ngoc Phu Tran, 2022. "Public spending and informal economy in the Asian countries," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2101220-210, December.
    16. Neutel, Marcel & Heshmati, Almas, 2006. "Globalisation, Inequality and Poverty Relationships: A Cross Country Evidence," IZA Discussion Papers 2223, Institute of Labor Economics (IZA).
    17. Daron Acemoglu & James Robinson, 2010. "The Role of Institutions in Growth and Development," Review of Economics and Institutions, Università di Perugia, vol. 1(2).
    18. Dell’Anno, Roberto & Davidescu, Adriana AnaMaria, 2019. "Estimating shadow economy and tax evasion in Romania. A comparison by different estimation approaches," Economic Analysis and Policy, Elsevier, vol. 63(C), pages 130-149.
    19. Eckhard Siggel, 2010. "The Indian informal sector: The impact of globalization and reform," International Labour Review, International Labour Organization, vol. 149(1), pages 93-105, March.
    20. Valentin F. Lang & Ms. Marina Mendes Tavares, 2018. "The Distribution of Gains from Globalization," IMF Working Papers 2018/054, International Monetary Fund.
    21. Carr, Marilyn. & Chen, Martha Alter., 2002. "Globalization and the informal economy : how global trade and investment impact on the working poor," ILO Working Papers 993541723402676, International Labour Organization.
    22. Andreas Bergh & Irina Mirkina & Therese Nilsson, 2014. "Globalization and Institutional Quality-A Panel Data Analysis," Oxford Development Studies, Taylor & Francis Journals, vol. 42(3), pages 365-394, September.
    23. Segun Thompson Bolarinwa & Munacinga Simatele, 2024. "Asymmetric Analysis of Causal Relations in the Informality–Globalisation Nexus in Africa," Economies, MDPI, vol. 12(7), pages 1-25, June.
    24. Bach Nguyen & Nguyen Phuc Canh, 2021. "Formal and informal financing decisions of small businesses," Small Business Economics, Springer, vol. 57(3), pages 1545-1567, October.
    25. Kate Meagher, 2021. "Informality and the Infrastructures of Inclusion: An Introduction," Development and Change, International Institute of Social Studies, vol. 52(4), pages 729-755, July.
    26. Stanley Fischer, 2003. "Globalization and Its Challenges," American Economic Review, American Economic Association, vol. 93(2), pages 1-30, May.
    27. Muralidharan, Etayankara & Pathak, Saurav, 2017. "Informal institutions and international entrepreneurship," International Business Review, Elsevier, vol. 26(2), pages 288-302.
    28. Besnik A. Krasniqi & Colin C. Williams, 2020. "Does informality help entrepreneurs achieve firm growth? evidence from a post-conflict economy," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 33(1), pages 1581-1599, January.
    29. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    30. Mengyun Wu & Jabbar Ul-Haq & Naeem uz Zafar & Huaping Sun & Jingyu Jiang, 2019. "Trade liberalization and informality nexus: Evidence from Pakistan," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 28(6), pages 732-754, August.
    31. Era Dabla-Norris & Gabriela Inchauste, 2008. "Informality and Regulations: What Drives the Growth of Firms?," IMF Staff Papers, Palgrave Macmillan, vol. 55(1), pages 50-82, April.
    32. repec:ilo:ilowps:354172 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Aziz N. Berdiev & Brandon Gomes & James W. Saunoris, 2023. "Revisiting the nexus between globalisation and the shadow economy: Untying the influences of de jure versus de facto globalisation," The World Economy, Wiley Blackwell, vol. 46(1), pages 27-54, January.
    2. Canh Phuc Nguyen & Binh Nguyen Quang & Thanh Dinh Su, 2023. "Institutional frameworks and the shadow economy: new evidence of colonial history, socialist history, religion, and legal systems," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 50(3), pages 647-675, September.
    3. Nam, Hyun-Jung & Frijns, Bart & Ryu, Doojin, 2024. "Trade openness and income inequality: The moderating role of institutional quality," Global Finance Journal, Elsevier, vol. 60(C).
    4. Chien, Fengsheng & Anwar, Ahsan & Hsu, Ching-Chi & Sharif, Arshian & Razzaq, Asif & Sinha, Avik, 2021. "The role of information and communication technology in encountering environmental degradation: Proposing an SDG framework for the BRICS countries," Technology in Society, Elsevier, vol. 65(C).
    5. Fattouh, Bassam & Pisicoli, Beniamino & Scaramozzino, Pasquale, 2024. "Debt and financial fragility: Italian non-financial companies after the pandemic," Economic Modelling, Elsevier, vol. 131(C).
    6. Michael L. Polemis & Mike G. Tsionas, 2023. "The environmental consequences of blockchain technology: A Bayesian quantile cointegration analysis for Bitcoin," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1602-1621, April.
    7. Talan, Amogh & Rao, Amar & Sharma, Gagan Deep & Apostu, Simona-Andreea & Abbas, Shujaat, 2023. "Transition towards clean energy consumption in G7: Can financial sector, ICT and democracy help?," Resources Policy, Elsevier, vol. 82(C).
    8. Khan, Yasir & Hassan, Taimoor & Guiqin, Huang & Nabi, Ghulam, 2023. "Analyzing the impact of natural resources and rule of law on sustainable environment: A proposed policy framework for BRICS economies," Resources Policy, Elsevier, vol. 86(PA).
    9. Wang, Xiang & Yin, Jian & Yang, Yao & Muda, Iskandar & Abduvaxitovna, Shamansurova Zilola & AlWadi, Belal Mahmoud & Castillo-Picon, Jorge & Abdul-Samad, Zulkiflee, 2023. "Relationship between the resource curse, Forest management and sustainable development and the importance of R&D Projects," Resources Policy, Elsevier, vol. 85(PA).
    10. Zongwu Cai & Meng Shi & Yue Zhao & Wuqing Wu, 2020. "Testing Financial Hierarchy Based on A PDQ-CRE Model," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 202011, University of Kansas, Department of Economics, revised Jul 2020.
    11. Robert Becker Pickson & Peng Gui & Lirong Jian & Elliot Boateng, 2025. "The role of private sector investment in agriculture: A catalyst for sustainable development in Asia," Sustainable Development, John Wiley & Sons, Ltd., vol. 33(1), pages 113-128, February.
    12. Elena D’Agostino & Marco Alberto De Benedetto & Giuseppe Sobbrio, 2023. "Does the economic freedom hinder the underground economy? Evidence from a cross-country analysis," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(1), pages 319-341, April.
    13. Nooshin Karimi Alavijeh & Narges Salehnia, 2024. "Climate change, renewable and non-renewable energy consumption and agricultural development in the Middle East and North African countries," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(8), pages 21125-21145, August.
    14. Lepinteur, Anthony & Menta, Giorgia & Waltl, Sofie R., 2025. "Equal price for equal place? Demand-driven racial discrimination in the housing market," Regional Science and Urban Economics, Elsevier, vol. 111(C).
    15. Mohd Alsaleh & Xiaohui Wang & Zhang Nan, 2024. "Toward marine sustainability: Unveiling the effect of the fishery industry on blue carbon sequestration," Sustainable Development, John Wiley & Sons, Ltd., vol. 32(1), pages 481-495, February.
    16. Sena Kimm Gnangnon, 2023. "Effect of the Shadow Economy on Tax Reform in Developing Countries," Economies, MDPI, vol. 11(3), pages 1-49, March.
    17. Bilgili, Faik & Soykan, Erkan & Dumrul, Cüneyt & Awan, Ashar & Önderol, Seyit & Khan, Kamran, 2023. "Disaggregating the impact of natural resource rents on environmental sustainability in the MENA region: A quantile regression analysis," Resources Policy, Elsevier, vol. 85(PA).
    18. Nooshin Karimi Alavijeh & Mohammad Taher Ahmadi Shadmehri & Parisa Esmaeili & Fatemeh Dehdar, 2024. "Asymmetric Impacts of Renewable Energy on Human Development: Exploring the Role of Carbon Emissions, Economic Growth, and Urbanization in European Union Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(4), pages 17188-17212, December.
    19. Almeida, Eloiza R.F. & Araújo, Veneziano & Gonçalves, Solange L., 2022. "Urban wage premium for women: evidence across the wage distribution," World Development, Elsevier, vol. 159(C).
    20. Matthias Busse & Ceren Erdogan & Henning Mühlen, 2019. "Structural transformation and its relevance for economic growth in Sub‐Saharan Africa," Review of Development Economics, Wiley Blackwell, vol. 23(1), pages 33-53, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:sustdv:v:33:y:2025:i:1:p:478-492. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1099-1719 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.