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Informal–Formal Linkages and Informal Enterprise Performance in Urban West Africa

Author

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  • Marcus H Böhme

    () (Kiel Institute for the World Economy, Kiel, Germany.)

  • Rainer Thiele

    () (Kiel Institute for the World Economy, Kiel, Germany.)

Abstract

Employing a unique data set that covers almost 6000 informal enterprises from six West African urban centres, this article examines the backward and forward linkages of these enterprises to the formal sector. Our descriptive analysis shows that formal backward linkages are much more prevalent than formal forward linkages, and that linkages vary with the degree of informality, occurring less frequently if firms have no ties to the formal sector at all or low-capital stocks. Further econometric analysis corroborates the importance of the degree of informality for the existence of linkages and shows various enterprise characteristics to be significant determinants. Finally, we analyse whether backward linkages matter for enterprise performance using both ordinary least squares (OLS) and instrumental variable (IV) estimations. We find a positive and robust impact of backward linkages, whereas the degree of informality of the enterprises in our sample seems to affect firm performance only indirectly through their linkages to the formal sector.

Suggested Citation

  • Marcus H Böhme & Rainer Thiele, 2014. "Informal–Formal Linkages and Informal Enterprise Performance in Urban West Africa," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 26(4), pages 473-489, September.
  • Handle: RePEc:pal:eurjdr:v:26:y:2014:i:4:p:473-489
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    Cited by:

    1. Andes Chivangue & Carlos Barros, 2017. "Poverty and Informal Trade," CEsA Working Papers 151, CEsA - Center for African, Asian and Latin American Studies.
    2. Floridi, A. & Wagner, N. & Cameron, J., 2016. "A study of Egyptian and Palestine trans-formal firms – A neglected category operating in the borderland between formality and informality," ISS Working Papers - General Series 619, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    3. Mohamed Amara, 2016. "The linkages between formal and informal employment growth in Tunisia: a spatial simultaneous equations approach," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 56(1), pages 203-227, January.
    4. repec:spr:ijlaec:v:59:y:2016:i:3:d:10.1007_s41027-017-0069-0 is not listed on IDEAS
    5. Ghani, Ejaz & O'Connell, Stephen D. & Sharma, Gunjan, 2013. "Friend or foe or family ? a tale of formal and informal plants in India," Policy Research Working Paper Series 6588, The World Bank.
    6. Traoré, Jean Abel & Ouedraogo, Idrissa Mohamed, 2015. "Public policies promoting the informal economy: effects on incomes, employment and growth in Burkina Faso," MPRA Paper 74760, University Library of Munich, Germany.
    7. Ana Moreno-Monroy & Janneke Pieters & Abdul Erumban, 2014. "Formal sector subcontracting and informal sector employment in Indian manufacturing," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-17, December.
    8. Essien, Ubon Asuquo & Arene, Chukwuemeka John, 3. "An Analysis Of Access To Credit Markets And The Performance Of Small Scale Agro- Based Enterprises In The Niger Delta Region Of Nigeria," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 2(3).
    9. repec:wsi:jdexxx:v:22:y:2017:i:02:n:s108494671750008x is not listed on IDEAS
    10. Mboutchouang, Vincent De Paul & Kenneck, Joseph Massil & Mbenga Bindop, Kunz Modeste, 2013. "Transmission Intergénérationelle de l’Entrepreneuriat et Performance des Unités de Production Informelles au Cameroun," MPRA Paper 50133, University Library of Munich, Germany, revised Aug 2013.

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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