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

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  • Julia Vaillant

    (1] The World Bank, Washington DC, USA.[2] Institut de Recherche pour le Developpement, DIAL, Paris, France.)

  • Michael Grimm

    (1] University of Passau, Passau, Germany.[2] IZA, Bonn, Germany.[3] Erasmus University Rotterdam, The Hague, The Netherlands.)

  • Jann Lay

    (1] German Institute of Global and Area Studies, Hamburg, Germany.[2] University of Göttingen, Göttingen, Germany.)

  • François Roubaud

    (Institut de Recherche pour le Developpement, DIAL, Paris, France.)

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.

Suggested Citation

  • Julia Vaillant & Michael Grimm & Jann Lay & François Roubaud, 2014. "Informal sector dynamics in times of fragile growth: The case of Madagascar," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 26(4), pages 437-455, September.
  • Handle: RePEc:pal:eurjdr:v:26:y:2014:i:4:p:437-455
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    References listed on IDEAS

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    1. Bosch, Mariano & Maloney, William F., 2010. "Comparative analysis of labor market dynamics using Markov processes: An application to informality," Labour Economics, Elsevier, vol. 17(4), pages 621-631, August.
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    Cited by:

    1. repec:dau:papers:123456789/12203 is not listed on IDEAS
    2. Huu Chi Nguyen & Christophe Nordman, 2014. "Household entrepreneurship and social networks:panel data evidence from Vietnam," Working Papers DT/2014/22, DIAL (Développement, Institutions et Mondialisation).
    3. Nordman, Christophe J. & Rakotomanana, Faly & Roubaud, François, 2016. "Informal versus Formal: A Panel Data Analysis of Earnings Gaps in Madagascar," World Development, Elsevier, vol. 86(C), pages 1-17.
    4. Christophe Nordman & Julia Vaillant, 2013. "Inputs, Gender Roles or Sharing Norms? Assessing the Gender Performance Gap Among Informal Entrepreneurs in Madagascar," Working Papers DT/2013/15, DIAL (Développement, Institutions et Mondialisation).
    5. Franck M. Adoho & Djeneba Doumbia, 2017. "Informal sector heterogeneity and income inequality: Evidence from the Democratic Republic of Congo," Working Papers 447, ECINEQ, Society for the Study of Economic Inequality.
    6. Bulte, Erwin & Wang, Ruixin & Zhang, Xiaobo, 2017. "Forced gifts: The burden of being a friend," IFPRI discussion papers 1615, International Food Policy Research Institute (IFPRI).
    7. Michael Grimm & Rolph van der Hoeven & Jann Lay & Francois Roubaud, 2012. "Neubewertung des informellen Sektors und Unternehmertums in Sub-Sahara-Afrika," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 81(3), pages 69-83.
    8. repec:dau:papers:123456789/10601 is not listed on IDEAS
    9. repec:eee:quaeco:v:65:y:2017:i:c:p:61-70 is not listed on IDEAS
    10. Fox, Louise & Sohnesen , Thomas Pave, 2012. "Household enterprises in Sub-Saharan Africa : why they matter for growth, jobs, and livelihoods," Policy Research Working Paper Series 6184, The World Bank.
    11. repec:dau:papers:123456789/14463 is not listed on IDEAS

    More about this item

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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