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Informal sector heterogeneity and income inequality : evidence from the Democratic Republic of Congo

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  • Adoho,Franck M.
  • Doumbia,Djeneba

Abstract

This paper uses 1-2-3 survey data on the Democratic Republic of Congo to analyze heterogeneity in the informal sector. It empirically identifies three types of entrepreneurs in the sector. The first group of entrepreneurs?top performers -- is growth oriented and enjoys greater access to capital. The second group?constrained gazelles -- includes entrepreneurs who share many characteristics, especially management skills, with the top performers, but operate with less capital. The third group?survivalists?comprises firms struggling to grow. Based on logit and fixed effect ordinary least squares models, the results presented in this paper show that poverty and income inequality are more common among constrained gazelles and survivalists. The paper also shows that income inequality is explained mainly by educational disparities and lack of credit access among entrepreneurs. Additionally, the outcomes of a Blinder-Oaxaca decomposition show that the performance of firms is a key factor in explaining differences in income. Examining the drivers of performance, the paper finds that human capital and managerial skills are important engines of performance.

Suggested Citation

  • Adoho,Franck M. & Doumbia,Djeneba, 2018. "Informal sector heterogeneity and income inequality : evidence from the Democratic Republic of Congo," Policy Research Working Paper Series 8328, The World Bank.
    • Handle: RePEc:wbk:wbrwps:8328
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    Cited by:

    1. Walter Heredia & Antonio Lecuna & Jorge Heredia & Cristian Geldes & Alejandro Flores, 2023. "Effect of corruption and crime on growth-oriented informal firms," International Entrepreneurship and Management Journal, Springer, vol. 19(4), pages 2065-2091, December.
    2. Jacques Sadiki & Stany Vwima & Philippe Lebailly, 2020. "Obstacles and Performance of Agribusiness Enterprises: Evidence from South-Kivu Eastern Democratic Republic of Congo," Asian Social Science, Canadian Center of Science and Education, vol. 16(11), pages 1-7, November.
    3. Cerkez, Nicolas & Cunningham, Wendy & Gupta, Sarika & Lung, Felix, 2025. "What Do Small and Informal Household Enterprises Want ?," Policy Research Working Paper Series 11235, The World Bank.
    4. Ibale, Douglas Amuli & Docquier, Frédéric & Iftikhar, Zainab, 2024. "Spatial Inequality, Poverty and Informality in the Democratic Republic of the Congo," World Development, Elsevier, vol. 173(C).
    5. Damien Girollet, 2024. "Digital divides among microenterprises: Evidence from sub‐Saharan Africa," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(2), pages 1350-1380, March.
    6. Damien GIROLLET, 2023. "Digital divides among microsized firms: Evidence from Sub-Saharan Africa," Bordeaux Economics Working Papers 2023-03, Bordeaux School of Economics (BSE).
    7. Angelucci, Manuela & Heath, Rachel & Noble, Eva, 2023. "Multifaceted programs targeting women in fragile settings: Evidence from the Democratic Republic of Congo," Journal of Development Economics, Elsevier, vol. 164(C).
    8. Jean-Philippe Berrou & Damien Girollet, 2019. "A la recherche des « gazelles » du secteur informel urbain africain. Entreprises et entrepreneurs à fort potentiel dans leur environnement socioéconomique et numérique," Working Papers hal-02507441, HAL.
    9. Héritier Mesa, 2021. "'We might all live the same life, but we are not the same'. Class and social Position in Kinshasa's second-hand clothing trade," ULB Institutional Repository 2013/313551, ULB -- Universite Libre de Bruxelles.

    More about this item

    Keywords

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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • 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

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