Determinants of the informal economy of an emerging economy: a multiple indicator, multiple causes (MIMIC) approach

Eghosa Igudia, Robert Ackrill, Simeon Coleman, Carlyn Dobson, Colin Williams (Editor), Nick Williams (Editor)

Research output: Contribution to Book/Report typesChapter

Abstract

The debate about the best way to tackle the problems (both perceived and real) in the informal economy is on-going. In this study, we argue that, if the informal economy is to be tackled successfully, policies should focus on evidence-based factors that influence participation in the sector. We posit that although several factors have been identified in the literature as determinants, not all are relevant in every economy. This underscores the need for country-specific studies. In this study, we focus on Nigeria. To identify and/or confirm the determinants specific to the Nigerian informal economy, our paper employs, in a novel way, the multiple-cause, multiple-indicator model, and primary data. Building on previous literature[1,2], relevant determinants of the informal economy were constructed from participants’ responses to questions designed to solicit such information. While all literature-defined determinants were included in the questionnaire, not all were identified as important by participants in our survey. Particularly, we found the factors that determine the origin and expansion of the Nigerian informal economy to include: unemployment, need to be autonomous/self-employed, corruption of government officials/agencies, participants’ desire to pay less tax, and participants’ need to survive. The greatest influence, in terms of magnitude and impacts, comes from the ‘participants’ need to survive’ factor. This is followed by corruption. Our policy recommendations follow these identified factors, and recognise the positive important role played by the informal economy in emerging economies. Also, there are suggestions that, though country-specific, findings and recommendations from this study may be used to inform policy in other countries with similar economic structures as Nigeria. However, the differences in magnitudes and impacts of the reported determinants of the Nigerian informal economy strengthen our assertion that a country-specific study is necessary, if the most appropriate policies are to be implemented.
Original languageEnglish
Title of host publication8th International Conference for Entrepreneurship, Innovation and Regional Development
Place of PublicationEngland
PublisherICEIRD, The University of Sheffield, SEERC
Pages384-401
Number of pages821
ISBN (Print)9780993280108
Publication statusPublished - 18 Jun 2015

Fingerprint

Emerging economies
Informal economy
Factors
Corruption
Nigeria
Evidence-based
Unemployment
Government
Tax
Questionnaire
Participation
Economic structure
Influence factors

Keywords

  • Determinants of the informal economy
  • emerging economy's informal sector
  • MIMIC approach
  • policies for tackling the informal sector
  • the Nigerian informal economy

Cite this

Igudia, E., Ackrill, R., Coleman, S., Dobson, C., Williams, C. (Ed.), & Williams, N. (Ed.) (2015). Determinants of the informal economy of an emerging economy: a multiple indicator, multiple causes (MIMIC) approach. In 8th International Conference for Entrepreneurship, Innovation and Regional Development (pp. 384-401). England: ICEIRD, The University of Sheffield, SEERC.
Igudia, Eghosa ; Ackrill, Robert ; Coleman, Simeon ; Dobson, Carlyn ; Williams, Colin (Editor) ; Williams, Nick (Editor). / Determinants of the informal economy of an emerging economy: a multiple indicator, multiple causes (MIMIC) approach. 8th International Conference for Entrepreneurship, Innovation and Regional Development. England : ICEIRD, The University of Sheffield, SEERC, 2015. pp. 384-401
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Igudia, E, Ackrill, R, Coleman, S, Dobson, C, Williams, C (ed.) & Williams, N (ed.) 2015, Determinants of the informal economy of an emerging economy: a multiple indicator, multiple causes (MIMIC) approach. in 8th International Conference for Entrepreneurship, Innovation and Regional Development. ICEIRD, The University of Sheffield, SEERC, England, pp. 384-401.

Determinants of the informal economy of an emerging economy: a multiple indicator, multiple causes (MIMIC) approach. / Igudia, Eghosa; Ackrill, Robert; Coleman, Simeon; Dobson, Carlyn; Williams, Colin (Editor); Williams, Nick (Editor).

8th International Conference for Entrepreneurship, Innovation and Regional Development. England : ICEIRD, The University of Sheffield, SEERC, 2015. p. 384-401.

Research output: Contribution to Book/Report typesChapter

TY - CHAP

T1 - Determinants of the informal economy of an emerging economy: a multiple indicator, multiple causes (MIMIC) approach

AU - Igudia, Eghosa

AU - Ackrill, Robert

AU - Coleman, Simeon

AU - Dobson, Carlyn

A2 - Williams, Colin

A2 - Williams, Nick

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AB - The debate about the best way to tackle the problems (both perceived and real) in the informal economy is on-going. In this study, we argue that, if the informal economy is to be tackled successfully, policies should focus on evidence-based factors that influence participation in the sector. We posit that although several factors have been identified in the literature as determinants, not all are relevant in every economy. This underscores the need for country-specific studies. In this study, we focus on Nigeria. To identify and/or confirm the determinants specific to the Nigerian informal economy, our paper employs, in a novel way, the multiple-cause, multiple-indicator model, and primary data. Building on previous literature[1,2], relevant determinants of the informal economy were constructed from participants’ responses to questions designed to solicit such information. While all literature-defined determinants were included in the questionnaire, not all were identified as important by participants in our survey. Particularly, we found the factors that determine the origin and expansion of the Nigerian informal economy to include: unemployment, need to be autonomous/self-employed, corruption of government officials/agencies, participants’ desire to pay less tax, and participants’ need to survive. The greatest influence, in terms of magnitude and impacts, comes from the ‘participants’ need to survive’ factor. This is followed by corruption. Our policy recommendations follow these identified factors, and recognise the positive important role played by the informal economy in emerging economies. Also, there are suggestions that, though country-specific, findings and recommendations from this study may be used to inform policy in other countries with similar economic structures as Nigeria. However, the differences in magnitudes and impacts of the reported determinants of the Nigerian informal economy strengthen our assertion that a country-specific study is necessary, if the most appropriate policies are to be implemented.

KW - Determinants of the informal economy

KW - emerging economy's informal sector

KW - MIMIC approach

KW - policies for tackling the informal sector

KW - the Nigerian informal economy

M3 - Chapter

SN - 9780993280108

SP - 384

EP - 401

BT - 8th International Conference for Entrepreneurship, Innovation and Regional Development

PB - ICEIRD, The University of Sheffield, SEERC

CY - England

ER -

Igudia E, Ackrill R, Coleman S, Dobson C, Williams C, (ed.), Williams N, (ed.). Determinants of the informal economy of an emerging economy: a multiple indicator, multiple causes (MIMIC) approach. In 8th International Conference for Entrepreneurship, Innovation and Regional Development. England: ICEIRD, The University of Sheffield, SEERC. 2015. p. 384-401