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The size of the informal economy in Nigeria: a structural equation approach

Author

Listed:
  • Roberto Dell'Anno
  • Omobola Adu

Abstract

Purpose - This paper contributes to the literature concerning the Nigerian informal economy (IE) by estimating its size from 1991 to 2017 and identifying the major causes. Design/methodology/approach - A structural equation approach in the form of the multiple indicators multiple causes (MIMIC) method is used to estimate the size of the Nigerian IE. Findings - The results indicate that vulnerable employment and urban population as a percentage of the total population are the main drivers of the IE in Nigeria. The IE in Nigeria ranges from 38.83% to 57.55% of gross domestic product (GDP). Research limitations/implications - As a result of the empirical challenges in the estimation of the IE, the estimates of Nigeria's IE are considered to be rough estimates. Originality/value - The authors calibrated the MIMIC model with the official estimate of the informal sector published by the Nigerian National Bureau of Statistics (NBS). This was an attempt to combine the national accounting approach, to estimate the size of IE, with the MIMIC approach, and to estimate the trend of informality.

Suggested Citation

  • Roberto Dell'Anno & Omobola Adu, 2020. "The size of the informal economy in Nigeria: a structural equation approach," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 47(8), pages 1063-1078, July.
    • Handle: RePEc:eme:ijsepp:ijse-12-2019-0747
    DOI: 10.1108/IJSE-12-2019-0747
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    Citations

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    Cited by:

    1. Mangirdas Morkunas, 2022. "Measuring the Level of the Youth Informal Economy in Lithuania in 2004–2020," Economies, MDPI, vol. 10(11), pages 1-13, November.
    2. Musa Abdullahi Sakanko & Joseph David & Nurudeen Abu & Awadh Ahmed Mohammed Gamal, 2024. "Financial inclusion and underground economy nexus in West Africa: evidence from dynamic heterogeneous panel techniques," Economic Change and Restructuring, Springer, vol. 57(1), pages 1-20, February.
    3. Katarzyna Cieslik & Roland Banya & Bhaskar Vira, 2022. "Offline contexts of online jobs: Platform drivers, decent work, and informality in Lagos, Nigeria," Development Policy Review, Overseas Development Institute, vol. 40(4), July.

    More about this item

    Keywords

    Informal economy; Structural equation approach; MIMIC; Nigeria; C30; E26; O17;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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