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An empirical analysis of the informal sector in Ghana

Author

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  • Prosper Senyo Koto*

    (University of Manitoba, Canada)

Abstract

This paper examines the determinants of the decision of owners of small enterprises in Ghana to participate in the informal sector at start-up. For enterprises participating in the informal sector, the paper evaluates whether there are linkages with formal sector enterprises, and the determinants of the linkage. Data for the analysis is from the 2013 World Bank Enterprise survey. Using binary choice models, it is evident from the analysis that the informal sector in Ghana is dominated by people who have low levels of education, and hence, do not have otherwise employable skills. Undertaking economic activities in the informal sector becomes a means to survival, and not necessarily an attempt to evade compliance with formal sector regulations. The challenge to policy makers in Ghana is to find the right balance between policies that reduces the costs to enterprises of participating in the informal sector, whiles increasing the benefits for participating in the formal economy.

Suggested Citation

  • Prosper Senyo Koto*, 2015. "An empirical analysis of the informal sector in Ghana," Journal of Developing Areas, Tennessee State University, College of Business, vol. 49(2), pages 93-108, April-Jun.
    • Handle: RePEc:jda:journl:vol.49:year:2015:issue2:pp:93-108
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    File URL: http://muse.jhu.edu/journals/journal_of_developing_areas/v049/49.2.koto.html
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    Citations

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    Cited by:

    1. Ibrahim Mohammed & Priscilla Twumasi Baffour & Wassiuw Abdul Rahaman, 2021. "Gender Differences in Earnings Rewards to Personality Traits in Wage-employment and Self-employment Labour Markets," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 46(2), pages 204-228, May.
    2. Kaushal Basnet, 2018. "Access to Credit Markets and Decisions of an Entrepreneur," Journal of Development Innovations, KarmaQuest International, vol. 2(1), pages 39-56, May.
    3. Colin C. Williams & Kwame Adom & Ioana Alexandra Horodnic, 2020. "Determinants Of The Level Of Informalization Of Enterprises: Some Evidence From Accra, Ghana," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 25(01), pages 1-24, March.
    4. Adomako, Samuel & Amankwah-Amoah, Joseph & Ahsan, Mujtaba, 2023. "Base of the pyramid orientation, imitation orientation and new product performance in an emerging market," Technovation, Elsevier, vol. 119(C).
    5. repec:kqi:journl:2018-2-1-1 is not listed on IDEAS

    More about this item

    Keywords

    Informal sector; World Bank Enterprise Survey; Ghana; IV Probit Journal: the Journal of Developing Areas;
    All these keywords.

    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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