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Is informality a barrier to sustainable development?

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  • Gökçer Özgür
  • Ceyhun Elgin
  • Adem Y. Elveren

Abstract

In this article, using a novel, annual cross‐country panel dataset that covers 160 economies from 1950 to 2016, we examine the association between the size of the informal sector and various indicators of sustainable development. The range of indicators encompasses health‐related, economic, environmental, education, and social variables. Our results suggest that the size of the informal sector is negatively associated with GDP per capita, carbon dioxide emissions per capita, education, educational attainment, life expectancy, and access to safe drinking water, and positively related to female labor force participation rate, poverty rates, mortality rates, and air pollution. We also find that these empirical associations significantly interact with GDP per capita, indicating that the effect of larger informal sector size is stronger in less developed economies.

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  • Gökçer Özgür & Ceyhun Elgin & Adem Y. Elveren, 2021. "Is informality a barrier to sustainable development?," Sustainable Development, John Wiley & Sons, Ltd., vol. 29(1), pages 45-65, January.
    • Handle: RePEc:wly:sustdv:v:29:y:2021:i:1:p:45-65
    DOI: 10.1002/sd.2130
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    2. Nahid Sultana & Mohammad Mafizur Rahman & Rasheda Khanam, 2022. "Informal Sector Employment and Economic Growth: Evidence from Developing Countries in SDG Perspective," Sustainability, MDPI, vol. 14(19), pages 1-19, September.
    3. Temitope Sade AKINTUNDE & Abiodun Samuel ISAYOMI, 2023. "The Effect Of Informal Economy On Human Capital Development," Business & Management Compass, University of Economics Varna, issue 3, pages 182-195.
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    5. Sultana, Nahid & Rahman, Mohammad Mafizur & Murad, S.M. Woahid, 2024. "Asymmetric role of the informal sector on economic growth: Empirical investigation on a developing country," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 96-107.
    6. Oanh Thi Kim Tran & Trang Thi Thanh Chu, 2024. "Threshold impact of shadow economy on sustainable development in high and low-financial development countries," HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE - ECONOMICS AND BUSINESS ADMINISTRATION, HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE, HO CHI MINH CITY OPEN UNIVERSITY, vol. 14(3), pages 109-128.
    7. Pick-Soon Ling & Ming K. Lim & Ming-Lang Tseng, 2020. "Assessing Sustainable Foreign Direct Investment Performance in Malaysia: A Comparison on Policy Makers and Investor Perceptions," Sustainability, MDPI, vol. 12(20), pages 1-38, October.
    8. Ceyhun Elgin & Colin C. Williams & Gamze Oz‐Yalaman & Abdullan Yalaman, 2022. "Fiscal stimulus packages to COVID‐19: The role of informality," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(4), pages 861-879, May.

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