Sector of Economic Activity and Poverty in Benin

This study, based on the theory of labour market segmentation, assesses the participation in the labour market in connection with poverty status. Using cross-sectional data from the household standard living condition survey of 2006 and k-means algorithm, the paper shows that the labour market in Benin comprises five segments. These are characterized by irregular workers, rural vulnerable independent, rural competitive salaried, urban competitive salaried, and a mixed group of protected employees and independent with capital. The paper presents a poverty profile for each segment. The rural vulnerable independent segment and that of the rural competitive salaried proved to be the poorest. The poverty status was estimated with a continuous censored dependent variable with selection controlled for by the conditional probabilities deriving from a multinomial logit. Results show the presence of unobserved factors affecting participation in segments that influence poverty status. The study suggests that poverty in the labour market is addressed by moving away from the traditional subdivision of the labour market in formal and informal markets. The study recommends that the labour market be considered as a set of heterogeneous segments in terms of poverty status and employment characteristics. This sub-division into a segment goes beyond simple formal-informal classification..