IDEAS home Printed from https://ideas.repec.org/a/wly/sustdv/v31y2023i3p1581-1592.html
   My bibliography  Save this article

Informality and poverty in Africa: Which comes first?

Author

Listed:
  • Segun Thompson Bolarinwa
  • Munacinga Simatele

Abstract

Existing empirical work has investigated the relationship between informality and poverty. However, most of this work has neglected the feedback effect. This empirical paper explores the bi‐directional causality between poverty and informality within the SGMM‐PVAR framework among 40 selected high‐income and low‐income Sub‐Saharan countries between 1991 and 2018. Our results support the heterogeneity argument, suggesting that sub‐Saharan African informality is demand and supply‐led. The income level of the country mediates the direction of effect. Bi‐direction causality is observed for low‐income countries. Causality in middle‐income countries runs from poverty to informality. The results suggest that a certain level of informality may be desirable, especially in low‐income countries.

Suggested Citation

  • 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.
    • Handle: RePEc:wly:sustdv:v:31:y:2023:i:3:p:1581-1592
    DOI: 10.1002/sd.2468
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/sd.2468
    Download Restriction: no
    File URL: https://libkey.io/10.1002/sd.2468?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. Loayza,Norman V., 2018. "Informality : Why Is It So Widespread and How Can It Be Reduced?," Research and Policy Briefs 133110, The World Bank.
    2. Hanan Nazier & Racha Ramadan, 2015. "Informality and Poverty: A Causality Dilemma with Application to Egypt," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 5(4), pages 1-4.
    3. Michael R. M. Abrigo & Inessa Love, 2016. "Estimation of panel vector autoregression in Stata," Stata Journal, StataCorp LLC, vol. 16(3), pages 778-804, September.
    4. Francesco Devicienti & Fernando Groisman & Ambra Poggi, 2010. "Chapter 4 Are informality and poverty dynamically interrelated? Evidence from Argentina," Research on Economic Inequality, in: Studies in Applied Welfare Analysis: Papers from the Third ECINEQ Meeting, pages 79-106, Emerald Group Publishing Limited.
    5. Timothy Besley & Torsten Persson, 2014. "Why Do Developing Countries Tax So Little?," Journal of Economic Perspectives, American Economic Association, vol. 28(4), pages 99-120, Fall.
    6. Segun Thompson Bolarinwa & Abiodun Adewale Adegboye & Xuan Vinh Vo, 2021. "Is there a nonlinear relationship between financial development and poverty in Africa?," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 48(7), pages 1245-1266, January.
    7. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LLC, vol. 9(1), pages 86-136, March.
    8. Carla Canelas, 2019. "Informality and poverty in Ecuador," Small Business Economics, Springer, vol. 53(4), pages 1097-1115, December.
    9. Néstor Gandelman & Alejandro Rasteletti, 2017. "Credit constraints, sector informality and firm investments: Evidence from a panel of Uruguayan firms," Journal of Applied Economics, Universidad del CEMA, vol. 20, pages 351-372, November.
    10. Ceyhun Elgin & Oguz Oztunali, 2012. "Shadow Economies around the World: Model Based Estimates," Working Papers 2012/05, Bogazici University, Department of Economics.
    11. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    12. David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006 8, Stata Users Group.
    13. Wintoki, M. Babajide & Linck, James S. & Netter, Jeffry M., 2012. "Endogeneity and the dynamics of internal corporate governance," Journal of Financial Economics, Elsevier, vol. 105(3), pages 581-606.
    14. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
    15. Michael R.M. Abrigo & Inessa Love, 2016. "Estimation of Panel Vector Autoregression in Stata: a Package of Programs," Working Papers 201602, University of Hawaii at Manoa, Department of Economics.
    16. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    17. Roberto Dell'Anno & Offiong Helen Solomon, 2008. "Shadow economy and unemployment rate in USA: is there a structural relationship? An empirical analysis," Applied Economics, Taylor & Francis Journals, vol. 40(19), pages 2537-2555.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.

    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. Thi Hong Hanh Pham, 2022. "Shadow Economy and Poverty: What Causes What?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 20(4), pages 861-891, December.
    2. Kaelo Mpho Ntwaepelo, 2021. "The Effects of Macroprudential and Monetary Policy Shocks in BRICS economies," Economics Discussion Papers em-dp2021-20, Department of Economics, University of Reading.
    3. Natalia Szomko, 2017. "The Importance of Estimation Method Choice for the Analysis of the Determinants of Capital Structure– An Example of Poland," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 3(1), pages 3-20, June.
    4. Caixe, Daniel Ferreira, 2022. "Corporate governance and investment sensitivity to policy uncertainty in Brazil," Emerging Markets Review, Elsevier, vol. 51(PB).
    5. KOUAKOU, Dorgyles C.M. & YEO, Kolotioloma I.H., 2023. "Can innovation reduce the size of the informal economy? Econometric evidence from 138 countries," MPRA Paper 119264, University Library of Munich, Germany.
    6. Sigmund, Michael & Ferstl, Robert, 2021. "Panel vector autoregression in R with the package panelvar," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 693-720.
    7. Seokjun Youn & Gregory R. Heim & Subodha Kumar & Chelliah Sriskandarajah, 2021. "Examining the Impacts of Clinical Practice Variation on Operational Performance," Production and Operations Management, Production and Operations Management Society, vol. 30(4), pages 839-863, April.
    8. Carlo Cambini & Elena Fumagalli & Laura Rondi, 2016. "Incentives to quality and investment: evidence from electricity distribution in Italy," Journal of Regulatory Economics, Springer, vol. 49(1), pages 1-32, February.
    9. Oguzhan Cepni & Ibrahim Ethem Guney & Doruk Kucuksarac & M. Hasan Yilmaz, 2021. "Do local and global factors impact the emerging markets' sovereign yield curves? Evidence from a data‐rich environment," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 40(7), pages 1214-1229, November.
    10. Awad, Atif & Albaity, Mohamed, 2022. "ICT and economic growth in Sub-Saharan Africa: Transmission channels and effects," Telecommunications Policy, Elsevier, vol. 46(8).
    11. Lin, Woon Leong & Law, Siong Hook & Ho, Jo Ann & Sambasivan, Murali, 2019. "The causality direction of the corporate social responsibility – Corporate financial performance Nexus: Application of Panel Vector Autoregression approach," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 401-418.
    12. Mohammed, Jabir Ibrahim & Karimu, Amin & Fiador, Vera Ogeh & Abor, Joshua Yindenaba, 2020. "Oil revenues and economic growth in oil-producing countries: The role of domestic financial markets," Resources Policy, Elsevier, vol. 69(C).
    13. Ejike Udeogu & Shampa Roy-Mukherjee & Uzochukwu Amakom, 2021. "Does Increasing Product Complexity and Diversity Cause Economic Growth in the Long-Run? A GMM Panel VAR Evidence," SAGE Open, , vol. 11(3), pages 21582440211, August.
    14. Hertweck, Matthias & Brey, Bjoern, 2017. "The Persistent Effects of Monsoon Rainfall Shocks in India: A Nonlinear VAR Approach," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168256, Verein für Socialpolitik / German Economic Association.
    15. Zinnia Mitra Bose & Indrani Chakraborty, 2022. "Effects of diversification on firm performance: an analysis of Indian firms," Indian Economic Review, Springer, vol. 57(2), pages 469-511, December.
    16. Ying Xu, 2009. "How does financial system efficiency affect the growth impact of FDI in China?," Asia Pacific Economic Papers 383, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
    17. Fabbri, Francesca & Marin, Dalia, 2012. "What explains the rise in CEO pay in Germany? A Panel Data Analysis for 1977-2009," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 374, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    18. Heng, Dyna, 2011. "Capital flows and real exchange rate: does financial development matter?," MPRA Paper 48553, University Library of Munich, Germany, revised May 2012.
    19. Yang, Yong, 2012. "Agglomeration density and tourism development in China: An empirical research based on dynamic panel data model," Tourism Management, Elsevier, vol. 33(6), pages 1347-1359.
    20. Zheng, Xinye & Li, Fanghua & Song, Shunfeng & Yu, Yihua, 2013. "Central government's infrastructure investment across Chinese regions: A dynamic spatial panel data approach," China Economic Review, Elsevier, vol. 27(C), pages 264-276.

    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:31:y:2023:i:3:p:1581-1592. 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.