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Informal Sector Dynamics in Times of Fragile Growth: the Case of Madagascar

  • Grimm, Michael
  • Roubaud, François
  • Vaillant, Julia
  • Lann, Jay

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.

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Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/7079.

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Date of creation: Sep 2014
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Publication status: Published in European Journal of Development Research, 2014, Vol. 26, no. 4. pp. 437-455.Length: 18 pages
Handle: RePEc:dau:papers:123456789/7079
Contact details of provider: Web page: http://www.dauphine.fr/en/welcome.html

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  15. Razafindrakoto, Mireille & Roubaud, François & Torelli, Constance, 2009. "Measuring the informal sector and informal employment: the experience drawn from 1-2-3 surveys in African countries," Economics Papers from University Paris Dauphine 123456789/10627, Paris Dauphine University.
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