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Informality and Inequality: The African Case

Author

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  • Anda David
  • Yoro Diallo
  • Björn Nilsson

Abstract

Despite the importance of labour markets in shaping inequalities, the literature linking the informal sector to income inequalities is scarce. In this article, we examine this linkage on the African continent, where informality has both been deemed a development curse, and lauded as a potential engine for growth. Recognising a multitude of mechanisms affecting both concepts, we investigate the link in two settings: using a panel of country data ranging from 1991 to 2015, and using a series of surveys on the informal sector from seven West African capitals. Focusing on the prism of social redistribution, we find evidence that a smaller informal sector has marginally contributed to reducing income inequalities but find no evidence that social redistribution has played a role in this evolution.

Suggested Citation

  • Anda David & Yoro Diallo & Björn Nilsson, 2023. "Informality and Inequality: The African Case," Journal of African Economies, Centre for the Study of African Economies, vol. 32(Supplemen), pages 273-295.
    • Handle: RePEc:oup:jafrec:v:32:y:2023:i:supplement_2:p:ii273-ii295.
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    More about this item

    Keywords

    income inequality; Africa; the informal sector; social redistribution; JEL classification: J46; D63; O17; O55;
    All these keywords.

    JEL classification:

    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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