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Informal Economy and Agricultural Productivity in Bangladesh: A Time Series Analysis

Author

Listed:
  • Saha Subrata

    (Associate Prof., Mawlana Bhashani Science and Technology University, Department of Economics, Tangail, Bangladesh)

  • Saha Sanjoy Kumar

    (Prof., Mawlana Bhashani Science and Technology University, Department of Economics, Tangail, Bangladesh)

Abstract

The aim of the study was to investigate the relationship between the informal economy and agricultural productivity in Bangladesh over a 25-year period from 1993 to 2018. While the impact of the black market on the economy is a well-studied topic, its implications for the agricultural sector in this specific country context was less explored. By controlling structural transformation, trade, and foreign direct investment (FDI) in agriculture, the authors employ autoregressive distributed lag (ARDL) using Kripfganz and Schneider’s (2018) approximations, as well as fully modified ordinary least square (FMOLS) and feasible generalized least square (FGLS) techniques. The results reveal that informality initially hampers agricultural productivity in the short term due to reduced government revenue, but in the long run, it acts as an active social protection system, fostering informal employment and providing essential amenities. Although the study’s time span limits the investigation to this specific period, it serves as a crucial attempt to assess the impact of informality on agriculture in Bangladesh, highlighting the need for cautious consideration of both the benefits and drawbacks of the informal sector in enhancing agricultural productivity. Policymakers in Bangladesh should act cautiously, acknowledging the nuances of the informal sector’s influence on agriculture to leverage its potential for sustainable economic growth.

Suggested Citation

  • Saha Subrata & Saha Sanjoy Kumar, 2023. "Informal Economy and Agricultural Productivity in Bangladesh: A Time Series Analysis," Zagadnienia Ekonomiki Rolnej / Problems of Agricultural Economics, Sciendo, vol. 376(3), pages 91-113, September.
    • Handle: RePEc:vrs:zerpae:v:376:y:2023:i:3:p:91-113:n:5
    DOI: 10.30858/zer/171498
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    References listed on IDEAS

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    More about this item

    Keywords

    agricultural productivity; informal economy; structural transformation; autoregressive distributed lag; cointegration.;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation

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