The Informal Economy, Economic Growth and Poverty in Sub-Saharan Africa

"This paper seeks to document the current state of affairs with respect to understanding how informality affects economic growth and poverty in SSA countries. It identifies various studies that have sought to show the relationship between economic growth and informality as well as between poverty and informality. The discussions also present the types of methodologies and data used for the analyses. Some of the policy discussions that have taken place recently are also presented in this paper. The paper has eight sections; with the introduction followed by section 2 which gives a brief discussion of some of the conceptual issues on the informal economy evolving over the years. Section 3 looks at informal institutions in the light of institutional economics, providing a theoretical framework for understanding informality. Section 4 provides a detailed overview of the role of the informal economy in the growth process, drawing out some of the barriers hindering its development. Section 5 covers the informal economy and poverty. In section 6 the broad literature on formalizing the informal economy is reviewed, followed by a discussion of strategic options which can be taken to engage the informal economy in productive activities in section 7. Section 8 is the concluding section."