Does Informality Hold the Key to Growth and Stability?

2020 ◽  
Vol 66 (1) ◽  
pp. 29-45
Author(s):  
Meghna Dutta
Keyword(s):  
Economic Growth ◽  
Informal Sector ◽  
Growth Rates ◽  
Informal Economy ◽  
Developing Economies ◽  
High Growth ◽  
Political Stability ◽  
The Impact

This paper attempts to analyse the impact of a prevailing informal sector on the dynamics of growth and inflation in developing economies. The high growth rates posited by most developing economies in the presence of a huge informal sector suggest that this sector might not be the malefactor as often indicated. The main results show that the informal economy not only contributes to economic growth but the firms also help to significantly reduce inflation by generating employment and hence maintain political stability in the economy despite the existence of a huge pool of “surplus labourers”.

scholarly journals Informality and Economic Growth in Nigeria: 1980-2014

2017 ◽  
Vol 3 (3) ◽  
pp. 405 ◽  
Author(s):  
Mohammed Yelwa ◽  
A. J. Adam
Keyword(s):  
Economic Growth ◽  
Informal Sector ◽  
Informal Economy ◽  
Data Series ◽  
Formal Sector ◽  
Female Population ◽  
Demand Deposit ◽  
The Impact ◽  
Adf Test ◽  
The Relationship

<p><em>The paper examines the impact of informal sector activities on economic growth in Nigeria between 1980-2014. The contributions of informal sector activities to the growth of Nigerian economy cannot be over emphasized. It is the source of livelihood to the majority of poor, unskilled, socially marginalized and female population and is the vital means of survival for the people in the country lacking proper safety nets and unemployment insurance especially those lacking skills from formal sector jobs. The relationship between informality and economic growth is not clear because the sector is not regulated by the law also there is no concrete evidence that this sector enhances growth because the sector’s contributions to growth is not measured. The use of endogenous growth model becomes relevant in this study. The theory emphasizes the role of production on the long-run via a higher rate of technological innovation. The variables that were tested are official economy nominal GDP, informal economy nominal GDP, currency in circulation, demand deposit, ratio of currency in circulation to demand deposit, narrow money, informal economy as percentage of official economy. ADF test was conducted to establish that the data series of all variables are stationary t levels. Having established the stationarity test we also, conducted causality test of the response of official economy nominal GDP to informal economy nominal GDP. In conclusion, the impact of informal sector economy on economic growth in Nigeria is quiet commendable. Even though, the relationship between informality and economic growth is not straight. The paper recommended thus, the need for the government to integrate the activities of the informal economy into formal sector and size of the sector is measured and regulated because their roles are commendable. As it will improve tax collection and enhance fiscal policy.</em></p>

The Role of Religion and National Culture in Economic Growth of Emerging Markets

2014 ◽  
pp. 250-270 ◽  
Author(s):  
Harish C. Chandan
Keyword(s):  
Economic Growth ◽  
Cultural Values ◽  
National Culture ◽  
Emerging Economies ◽  
Growth Rates ◽  
High Growth ◽  
Political Stability ◽  
Domestic Investment ◽  
Domestic Credit ◽  
The Protestant Work Ethic

Religion can influence economic growth and economic growth can influence religiosity (Barro & Mitchell, 2004; Barro & McCleary, 2003; McCleary, 2007). Earlier, Weber (1904, 1930, 1958) had suggested that the protestant work ethic gave rise to capitalism and that other major world religions including Catholicism, Judaism, Islam, Hinduism, Buddhism, Confucianism, and Daoism were not conducive to capitalism. However, the data on predicted growth rates and the current majority religion for the 24 emerging economies (Yeyati & Williams, 2012; IMF WEO, 2010) suggest these emerging economies with high growth rates include a variety of geo-political regions representing many different religions, national cultures, and even “no-religion” affiliation. For the same majority religion, the economic growth rates and Hofstede’s (1980) national culture dimensions vary among nations. Thus, religion alone is not sufficient to explain the higher economic growth of the emerging economies. The economic growth is influenced by additional social, political, and macroeconomic variables including human capital, infrastructure, technological progress, political stability, capital formation, domestic credit to private sector, foreign domestic investment, inflation rate, exchange rate, and international trade. In a secular sense, the religious beliefs and cultural values related to work and social ethic are conducive to economic growth through entrepreneurship and organizational effectiveness.

scholarly journals The Shadow Pandemic: Examining the Impact of COVID-19 on Zimbabwean Informal Sector in Chiredzi District

2021 ◽  
Vol 4 (1) ◽  
pp. 1-10
Author(s):  
Bismark Mutizwa
Keyword(s):  
Informal Sector ◽  
Informal Economy ◽  
Preventive Measures ◽  
Developing Economies ◽  
Illustrative Case ◽  
Government Grants ◽  
Remedial Actions ◽  
The Government ◽  
The Impact ◽  
Informal Traders

COVID-19 has disrupted the business sector globally, ushering developed and developing economies into an unprecedented recession beyond anything experienced in nearly a century. Governments across the globe have adopted a myriad of preventive measures. These remedial actions vary from one country to the other. Nonetheless, in Zimbabwe the government gave a blind eye on the informal sector as evidenced by the adopted preventive measures which neglected the plight of informal traders. To this end, this research interrogates the shadow pandemic in the Zimbabwean informal sector using Chiredzi District as an illustrative case study. Documentary review and key informed interviews were at the core of research methodology. The study found out that informal economy businesses are excluded from government grants, closure of businesses, failure to pay rentals, disruption of the supply chain, psychological impact and family dysfunctional are the quandaries causing a shadow pandemic. Inclusion of informal economy businesses in policies and government grants, government should negotiate with landlords, informal traders should be allowed to operate and inclusive social nets are the possible remedial actions that the government can adopted.

scholarly journals The Impact of Private Capital Flows on Economic Growth in the MENA Region

2020 ◽  
Vol 6 (20) (3) ◽  
pp. 45-67
Author(s):  
Ben-Salha Ousama ◽  
Zmami Mourad
Keyword(s):  
Economic Growth ◽  
Capital Flows ◽  
Growth Rates ◽  
High Growth ◽  
Private Capital ◽  
Mena Region ◽  
Portfolio Flows ◽  
Significant Difference ◽  
Private Capital Flows ◽  
The Impact

The aim of the article is to conduct an empirical analysis of the impact of aggregate and disaggregate private capital flows on economic growth in eleven MENA countries between 1980 and 2018. Unlike prior empirical studies, the fixed effect panel quantile approach developed by Canay (2011) is implemented. Findings suggest that there is a significant difference in the effects of private capital flows on economic growth across lower and higher quantiles. More specifically, the effects of total private capital flows, foreign direct investment flows, portfolio flows and debt flows are positive and statistically significant only for low and medium quantiles, indicating that the enhancing impact of private capital flows in terms of economic growth is only confirmed in countries with relatively low and medium growth rates. Moreover, debt flows affect economic growth in countries recording high growth rates, stressing the importance of financial development in routing those flows into the most productive projects in the economy.

The Role of Religion and National Culture in Economic Growth of Emerging Markets

2015 ◽  
pp. 1506-1526
Author(s):  
Harish C. Chandan
Keyword(s):  
Economic Growth ◽  
Cultural Values ◽  
National Culture ◽  
Emerging Economies ◽  
Growth Rates ◽  
High Growth ◽  
Political Stability ◽  
Domestic Investment ◽  
Domestic Credit ◽  
The Protestant Work Ethic

Religion can influence economic growth and economic growth can influence religiosity (Barro & Mitchell, 2004; Barro & McCleary, 2003; McCleary, 2007). Earlier, Weber (1904, 1930, 1958) had suggested that the protestant work ethic gave rise to capitalism and that other major world religions including Catholicism, Judaism, Islam, Hinduism, Buddhism, Confucianism, and Daoism were not conducive to capitalism. However, the data on predicted growth rates and the current majority religion for the 24 emerging economies (Yeyati & Williams, 2012; IMF WEO, 2010) suggest these emerging economies with high growth rates include a variety of geo-political regions representing many different religions, national cultures, and even “no-religion” affiliation. For the same majority religion, the economic growth rates and Hofstede's (1980) national culture dimensions vary among nations. Thus, religion alone is not sufficient to explain the higher economic growth of the emerging economies. The economic growth is influenced by additional social, political, and macroeconomic variables including human capital, infrastructure, technological progress, political stability, capital formation, domestic credit to private sector, foreign domestic investment, inflation rate, exchange rate, and international trade. In a secular sense, the religious beliefs and cultural values related to work and social ethic are conducive to economic growth through entrepreneurship and organizational effectiveness.

scholarly journals Informality, Inclusiveness and Economic Growth in Nigeria

2015 ◽  
Vol 1 (10) ◽  
pp. 33-44
Author(s):  
Mohammed Yelwa ◽  
S.A.J. Obansa Awe ◽  
Emmanuel Omonoyi
Keyword(s):  
Economic Growth ◽  
Informal Sector ◽  
Informal Economy ◽  
Information Dissemination ◽  
Labor Cost ◽  
Sustainable Growth ◽  
Survey Method ◽  
Inclusive Growth ◽  
Employment Opportunities ◽  
The Impact

The concept of inclusive growth requires analysis of how employment opportunities arise and change with growth process. Economic growth can be accompanied by an increase in informal employment. Informality may support growth by reducing labor cost and improving competitiveness. However, a well-functioning and regulated informal economy will be a critical prerequisite to achieve sustainable growth. In addition, a widespread informality with regard to employment, enterprise, and productive activities is frequently perceived as a barrier to full participation in the economy and as a hindrance to long-run economic development and poverty alleviation. This is because the link between, informality, growth and inclusiveness is not fully understood. Inclusive growth has been defined as growth that takes place in a context in which economic opportunities-including employment opportunities expand, the poor’s access to these opportunities improves, and inequalities are reduced. This paper seeks to investigate the impact of informal sector activities, inclusiveness and economic growth in Nigeria. A survey method will be use to collect data from 150 informal sector operators in Gwagwalada area council-FCT. Data will be collected using structured questionnaire and analyzed with multivariate Panel Logit model statistic in order to identify the perception of socio-economic impact of Informal sectors on economic growth in Nigeria. The findings revealed that informal sector operators has a positive and significant impact on growth in Nigeria; while poverty-mentality, illiteracy, high inflation, low infrastructure, access to credit, social safety nets and information dissemination are the major problems encountered by these institutions. The paper recommends among other things the education of the rural poor to embark on viable projects, infrastructural development and favorable government policies so as to regulate the sector becomes relevant

Institutional Quality and Trade Flow: Empirical Evidence from Malaysia and Other OIC Member Countries in Africa

2021 ◽  
pp. 097508782098717
Author(s):  
Hammed Agboola Yusuf ◽  
Luqman Olanrewaju Afolabi ◽  
Waliu Olawale Shittu ◽  
Kafilah Lola Gold ◽  
Murtala Muhammad
Keyword(s):  
Economic Growth ◽  
Bilateral Trade ◽  
Trade Flow ◽  
Estimation Method ◽  
Institutional Quality ◽  
Likelihood Estimation ◽  
Political Stability ◽  
Bilateral Trade Flow ◽  
World Governance Indicators ◽  
The Impact

This article examines the impact of institutional quality on bilateral trade flow between Malaysia and selected 25 African Organisation of Islamic Cooperation (OIC) member countries. Four institutional qualities were selected from World Governance Indicators with other trade predictors from the period from 1985 to 2016. Using gravity model of trade and Poisson pseudo-maximum likelihood estimation method (PPML) technique, the results confirm that government effectiveness, regulatory quality and political stability have an adverse effect on bilateral trade flow among the OIC countries in Africa. On the other hand, these institutional quality variables were considered as a strength for Malaysian economic growth. Therefore, better institutional quality reforms are needed among OIC member countries in Africa in order to accelerate trade, economic growth and development in their region.

Money Multiplier Bias Due to Informal Sector: An Extension of the Existing Money Multiplier

2021 ◽  
pp. 227797872097988
Author(s):  
Khurrum S. Mughal ◽  
Friedrich G. Schneider ◽  
Faheem Aslam ◽  
Alishba Tahir
Keyword(s):  
Money Supply ◽  
Informal Sector ◽  
Informal Economy ◽  
Economic Policies ◽  
Official Statistics ◽  
Jel Codes ◽  
Money Multiplier ◽  
Multiplier Effect ◽  
The Impact

To demonstrate the impact of informal economy on the official money multiplier in currency supply, we present an extension of the basic money multiplier model. The influence of economic policies may differ if they are based only on official statistics without considering the informal sector. Since most of the activities in informal sector are hidden from authorities, it is widely assumed that these activities are based on cash transactions, a part of total currency that cannot be attracted towards deposits due to the holder’s fear of prosecution and taxation, etc. Therefore, it is expected that such currency holdings can give biased results by playing a role in the money multiplier, a phenomenon that is usually ignored while attempting to alter money supply. The article also indicates that because of informal sector, the currency deposit ratio in the money multiplier is smaller than expected (depending on size of the informal sector), leading to a larger multiplier effect. JEL Codes: E26, E51, O17

scholarly journals Renewable Energy Development as a Driver of Economic Growth: Evidence from Multivariate Panel Data Analysis

2019 ◽  
Vol 11 (8) ◽  
pp. 2418 ◽  
Author(s):  
Nadia Singh ◽  
Richard Nyuur ◽  
Ben Richmond
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Renewable Energy ◽  
Energy Production ◽  
Developing Economies ◽  
Panel Data Analysis ◽  
Least Square ◽  
Renewable Energy Production ◽  
The Future ◽  
The Impact

Renewable energy is being increasingly touted as the “fuel of the future,” which will help to reconcile the prerogatives of high economic growth and an economically friendly development trajectory. This paper seeks to examine relationships between renewable energy production and economic growth and the differential impact on both developed and developing economies. We employed the Fully Modified Ordinary Least Square (FMOLS) regression model to a sample of 20 developed and developing countries for the period 1995–2016. Our key empirical findings reveal that renewable energy production is associated with a positive and statistically significant impact on economic growth in both developed and developing countries for the period 1995–2016. Our results also show that the impact of renewable energy production on economic growth is higher in developing economies, as compared to developed economies. In developed countries, an increase in renewable energy production leads to a 0.07 per cent rise in output, compared to only 0.05 per cent rise in output for developing countries. These findings have important implications for policymakers and reveal that renewable energy production can offer an environmentally sustainable means of economic growth in the future.

Fiscal Deficit and Economic Growth in Bangladesh

2016 ◽  
Vol 62 (1) ◽  
pp. 31-42 ◽  
Author(s):  
Ebney Ayaj Rana ◽  
Abu N. M. Wahid
Keyword(s):  
Economic Growth ◽  
Budget Deficit ◽  
Negative Impact ◽  
Political Stability ◽  
Ordinary Least Squares ◽  
Policy Implications ◽  
Government Budget ◽  
The Government ◽  
The Impact ◽  
Government Budget Deficit

The economy of Bangladesh is currently going through a period of continuous budget deficit. The present data suggest that the government budget deficit, on average, is nearly 5% of the country’s GDP. This has been true since the early 2000s. To finance this deficit, governments have been borrowing largely from domestic and foreign sources resulting in inflationary pressure on one hand, and crowding out of private investments on the other. During the same period, although the economy has grown steadily at a rate of more than 6%, this growth is less than the potential. This article presents an econometric study of the impact of government budget deficits on the economic growth of Bangladesh. We conduct a time-series analysis using ordinary least squares estimation, vector error correction model, and granger causality test. The findings suggest that the government budget deficit has statistically significant negative impact on economic growth in Bangladesh. Policy implications of our findings include reestablishing the rule of law, political stability in the country, restructuring tax structure, closing tax loopholes, and harmonizing fiscal policy with monetary policy to attract additional domestic and foreign investment.

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