The Informal Economy in Sub-Saharan Africa: Size and Determinants

IMF Working Papers, July 10, 2017

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Uses the multiple indicator-multiple cause (MIMIC) method as the established tool for measuring informal economic activity and notes criticism that "GDP is used both as a cause and indicator variable."
Applies for the first time the light intensity approach (instead of GDP) to address the MIMIC critique.
Uses the Predictive Mean Matching (PMM) method to estimate the size of the informal economy for Sub-Saharan African countries over 24 years.

Results suggest that informal economy in Sub-Saharan Africa "remains among the largest in the world."
The share of the informal economy "has been very gradually declining."
Finds significant heterogeneity across countries:
- Informality ranging from a low of "20 to 25 percent" in Mauritius, South Africa and Namibia.
- Informality ranging to a high of "50 to 65 percent" in Benin, Tanzania and Nigeria.

Subject: Currencies, Economic sectors, Informal economy, Labor, Labor force participation, Money, National accounts, Personal income, Unemployment rate
Keywords: Currencies, economic activity, estimation, GDP, Informal economy, informal economy activity, informal economy growth, Labor force participation, mimic approach, MIMIC estimation methods, model estimation result, Personal income, phrase informal economy, Sub-Saharan Africa, Unemployment rate, WP

The Informal Economy in Sub-Saharan Africa: Size and Determinants, WP/17/156, July 2017
- The Informal Economy in Sub-Saharan Africa: Size and Determinants, WP/17/156, July 2017 (Markdown version)
- The Informal Economy in Sub-Saharan Africa: Size and Determinants, WP/17/156, July 2017 (PDF)