IDEAS home Printed from https://ideas.repec.org/a/wly/sustdv/v31y2023i3p1581-1592.html
   My bibliography  Save this article

Informality and poverty in Africa: Which comes first?

Author

Listed:
  • Segun Thompson Bolarinwa
  • Munacinga Simatele

Abstract

Existing empirical work has investigated the relationship between informality and poverty. However, most of this work has neglected the feedback effect. This empirical paper explores the bi‐directional causality between poverty and informality within the SGMM‐PVAR framework among 40 selected high‐income and low‐income Sub‐Saharan countries between 1991 and 2018. Our results support the heterogeneity argument, suggesting that sub‐Saharan African informality is demand and supply‐led. The income level of the country mediates the direction of effect. Bi‐direction causality is observed for low‐income countries. Causality in middle‐income countries runs from poverty to informality. The results suggest that a certain level of informality may be desirable, especially in low‐income countries.

Suggested Citation

  • Segun Thompson Bolarinwa & Munacinga Simatele, 2023. "Informality and poverty in Africa: Which comes first?," Sustainable Development, John Wiley & Sons, Ltd., vol. 31(3), pages 1581-1592, June.
    • Handle: RePEc:wly:sustdv:v:31:y:2023:i:3:p:1581-1592
    DOI: 10.1002/sd.2468
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/sd.2468
    Download Restriction: no
    File URL: https://libkey.io/10.1002/sd.2468?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
    2. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    3. Loayza,Norman V., 2018. "Informality : Why Is It So Widespread and How Can It Be Reduced?," Research and Policy Briefs 133110, The World Bank.
    4. Néstor Gandelman & Alejandro Rasteletti, 2017. "Credit constraints, sector informality and firm investments: Evidence from a panel of Uruguayan firms," Journal of Applied Economics, Universidad del CEMA, vol. 20, pages 351-372, November.
    5. Michael R.M. Abrigo & Inessa Love, 2016. "Estimation of Panel Vector Autoregression in Stata: a Package of Programs," Working Papers 201602, University of Hawaii at Manoa, Department of Economics.
    6. Carla Canelas, 2019. "Informality and poverty in Ecuador," Small Business Economics, Springer, vol. 53(4), pages 1097-1115, December.
    7. Hanan Nazier & Racha Ramadan, 2015. "Informality and Poverty: A Causality Dilemma with Application to Egypt," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 5(4), pages 1-4.
    8. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    9. Timothy Besley & Torsten Persson, 2014. "Why Do Developing Countries Tax So Little?," Journal of Economic Perspectives, American Economic Association, vol. 28(4), pages 99-120, Fall.
    10. Michael R. M. Abrigo & Inessa Love, 2016. "Estimation of panel vector autoregression in Stata," Stata Journal, StataCorp LP, vol. 16(3), pages 778-804, September.
    11. Francesco Devicienti & Fernando Groisman & Ambra Poggi, 2010. "Chapter 4 Are informality and poverty dynamically interrelated? Evidence from Argentina," Research on Economic Inequality, in: Studies in Applied Welfare Analysis: Papers from the Third ECINEQ Meeting, pages 79-106, Emerald Group Publishing Limited.
    12. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    13. Roberto Dell'Anno & Offiong Helen Solomon, 2008. "Shadow economy and unemployment rate in USA: is there a structural relationship? An empirical analysis," Applied Economics, Taylor & Francis Journals, vol. 40(19), pages 2537-2555.
    14. Ceyhun Elgin & Oguz Oztunali, 2012. "Shadow Economies around the World: Model Based Estimates," Working Papers 2012/05, Bogazici University, Department of Economics.
    15. Segun Thompson Bolarinwa & Abiodun Adewale Adegboye & Xuan Vinh Vo, 2021. "Is there a nonlinear relationship between financial development and poverty in Africa?," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 48(7), pages 1245-1266, January.
    16. Wintoki, M. Babajide & Linck, James S. & Netter, Jeffry M., 2012. "Endogeneity and the dynamics of internal corporate governance," Journal of Financial Economics, Elsevier, vol. 105(3), pages 581-606.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thi Hong Hanh Pham, 2022. "Shadow Economy and Poverty: What Causes What?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 20(4), pages 861-891, December.
    2. Kaelo Mpho Ntwaepelo, 2021. "The Effects of Macroprudential and Monetary Policy Shocks in BRICS economies," Economics Discussion Papers em-dp2021-20, Department of Economics, University of Reading.
    3. KOUAKOU, Dorgyles C.M. & YEO, Kolotioloma I.H., 2023. "Can innovation reduce the size of the informal economy? Econometric evidence from 138 countries," MPRA Paper 119264, University Library of Munich, Germany.
    4. Mohammed, Jabir Ibrahim & Karimu, Amin & Fiador, Vera Ogeh & Abor, Joshua Yindenaba, 2020. "Oil revenues and economic growth in oil-producing countries: The role of domestic financial markets," Resources Policy, Elsevier, vol. 69(C).
    5. Sigmund, Michael & Ferstl, Robert, 2021. "Panel vector autoregression in R with the package panelvar," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 693-720.
    6. Ejike Udeogu & Shampa Roy-Mukherjee & Uzochukwu Amakom, 2021. "Does Increasing Product Complexity and Diversity Cause Economic Growth in the Long-Run? A GMM Panel VAR Evidence," SAGE Open, , vol. 11(3), pages 21582440211, August.
    7. Hertweck, Matthias & Brey, Bjoern, 2017. "The Persistent Effects of Monsoon Rainfall Shocks in India: A Nonlinear VAR Approach," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168256, Verein für Socialpolitik / German Economic Association.
    8. Lin, Woon Leong & Law, Siong Hook & Ho, Jo Ann & Sambasivan, Murali, 2019. "The causality direction of the corporate social responsibility – Corporate financial performance Nexus: Application of Panel Vector Autoregression approach," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 401-418.
    9. Hu, Juncheng, 2021. "Do facilitation payments affect earnings management? Evidence from China," Journal of Corporate Finance, Elsevier, vol. 68(C).
    10. Ayman Hassan Bazhair & Mohammed Naif Alshareef, 2022. "Dynamic relationship between ownership structure and financial performance: a Saudi experience," Cogent Business & Management, Taylor & Francis Journals, vol. 9(1), pages 2098636-209, December.
    11. António Afonso & Eduardo Rodrigues, 2024. "Is public investment in construction and in R&D, growth enhancing? A PVAR approach," Applied Economics, Taylor & Francis Journals, vol. 56(24), pages 2875-2899, May.
    12. Mehdi Nekhili & Fahim Javed & Haithem Nagati, 2022. "Audit Partner Gender, Leadership and Ethics: The Case of Earnings Management," Journal of Business Ethics, Springer, vol. 177(2), pages 233-260, May.
    13. Mohamed, Toka S. & Elgammal, Mohammed M., 2023. "Credit risk in Islamic microfinance institutions: The role of women, groups, and rural borrowers," Emerging Markets Review, Elsevier, vol. 54(C).
    14. MAÏ ASSAN CHEDI, Maman, 2022. "Does Defence Expenditure Affect Education and Health expenditures in Saharan Africa?," African Journal of Economic Review, African Journal of Economic Review, vol. 10(4), September.
    15. Omar Farooque & Wonlop Buachoom & Nam Hoang, 2019. "Interactive effects of executive compensation, firm performance and corporate governance: Evidence from an Asian market," Asia Pacific Journal of Management, Springer, vol. 36(4), pages 1111-1164, December.
    16. Charles Shaaba Saba & Nicholas Ngepah, 2022. "ICT Diffusion, Industrialisation and Economic Growth Nexus: an International Cross-country Analysis," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(3), pages 2030-2069, September.
    17. Nasr G. Elbahnasawy & Michael A. Ellis, 2016. "Economic Structure And Seigniorage: A Dynamic Panel Data Analysis," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 940-965, April.
    18. David T. Tan & Larelle Chapple & Kathleen D. Walsh, 2017. "Corporate fraud culture: Re-examining the corporate governance and performance relation," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(2), pages 597-620, June.
    19. Paul-Olivier Klein & Rima Turk-Ariss, 2022. "Bank capital and economic activity," Post-Print hal-03955630, HAL.
    20. Joan Costa-Font & Cristina Vilaplana-Prieto, 2023. "‘Investing’ in care for old age? An examination of long-term care expenditure dynamics and its spillovers," Empirical Economics, Springer, vol. 64(1), pages 1-30, January.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:sustdv:v:31:y:2023:i:3:p:1581-1592. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1099-1719 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.