Algeria-Mali Trade: the Normality of Informality

This paper estimates the volume of informal trade between Algeria and Mali and analyzes its determinants and mechanisms, using a multi-pronged methodology. First, we discuss how subsidy policies and the legal framework create incentives for informal trade across the Sahara. Second, we provide evidence of the importance of informal trade, drawing on satellite images and surveys with informal traders in Mali and Algeria. We estimate that the weekly turnover of informal trade fell from approximately US$ 2 million in 2011 to US$ 0.74 million in 2014, but continues to play a crucial role in the economies of northern Mali and southern Algeria. We also show that official trade statistics are meaningless in this context, as they capture less than 3% of total trade. Profit margins of 20-30% on informal trade contribute to explaining the relative prosperity of northern Mali. Informal trade probably plays a strong role in poverty reduction, especially in the Kidal region. Finally, we provide qualitative evidence on informal trade actors and the governance and social impacts of informal trade in North Mali and South Algeria.