Ethnic diversity and informal work in Ghana

Abstract

We present the first study that examines the effects of ethnic diversity on informal work. Using two waves of data from the Ghana Socioeconomic Panel Survey, we find that ethnic diversity is associated with a higher probability of engaging in informal work. Specifically, our instrumental variable estimates suggest that a unit increase in ethnic diversity is associated with up to a 26.3 percentage point increase in the probability of engaging in informal work. This result is robust to alternative estimation approaches and alternative ways of measuring ethnic diversity. Our results also show that trust, which is lower in ethnically diverse neighbourhoods, is an important channel through which ethnic diversity operates to increase the probability of engaging in informal work. Our results point to the need for policies that promote trust between diverse ethnic groups in heterogeneous societies.

Trust Institutions, Perceptions of Economic Performance, and the Mitigating Role of Political Diversity in Sub-Saharan Africa

“…In effect, the severity of endogeneity decreases with the length of the geographic dimension (Dustmann & Preston, 2001). Indeed, Awaworyi Churchill and Danquah (2020) utilized ethnic diversity at the regional level as an instrument to evaluate the effects of ethnic diversity on informal work. In another context, Bertschek and Niebel (2015) employed average mobile internet at industry level to mitigate the reverse causality between labor productivity and internet use.…”

“…Political diversity is measured at the district level. Its measure is based on ethnic or religious diversity widely used in the existing literature (Alesina et al, 2003; Awaworyi Churchill & Danquah, 2020; Benier & Wickes, 2016; Churchill et al, 2019, inter alia ). We use the question “ which party is that” after answering by “ yes” to the question “ Do you feel close to any particular political party?.” Let us define n i j as the share of political party i in the district j .…”

“…This approach of marginal indirect effects allows us to examine the heterogeneous response of economic conditions to trust at different political fractionalization levels in Africa. Finally, many authors on the topic have focused their studies on a single country (Awaworyi Churchill et al, 2019; Awaworyi Churchill & Danquah, 2020; Gisselquist et al, 2016; Hill, 2022), whereas this paper employs data from the Round 7 Afrobarometer Survey in 34 African countries and over 1000 districts in order to assess the modulating effect of diversity on the relationship between EP and trust institutions.…”

Urbanization, Legacies of Elite Capture, and Multi-Dimensional Exclusions in Ghana: Towards Just Housing and Neighborhood Policies in African Cities

“…Income levels in Ghana are low. Minimum wage sits just a little over $1 an hour (see Bloomberg Tax, 2021) and with most of the population trapped in insecure lowincome informal jobs (Awaworyi and Danquah 2020;Ehwi et al, 2021;Morrison et al, 2021), the number of minimum wage earners is relatively small. Even those with higher educational attainments, including graduates, face financial hardships evidenced by the incessant demonstrations, strikes and other industrial actions for better working conditions in the country (Asante et al, 2021).…”

“…(GSS), 2021c: 130). As a result, the informal sector has continued to blossom, employing some 80% of the total labor force (Awaworyi and Danquah 2020). Informal jobs, however, do not come with appointment letters/employment contracts, wage statements, income tax returns, credit reports and the other critical documents on which banks and financial institutions rely to honor mortgage applications (Boamah, 2009(Boamah, , 2014Karley, 2002;Teye et al, 2015), excluding most workers from the mortgage finance market.…”