Informality and poverty in Africa: Which comes first?

Bolarinwa, Segun Thompson; Simatele, Munacinga

doi:10.1002/sd.2468

Cited by 10 publications

(13 citation statements)

References 30 publications

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“…In middle-income countries, informality hurts poverty. This result is in line with studies in the literature on developing economies (Bolarinwa and Simatele, 2022; Pham, 2022). Overall, our finding is a different narrative on the role of informality in poverty reduction: informality reduces poverty in middle-income sub-Saharan African countries and increases poverty in low-income sub-Saharan African countries.…”

Section: Empirical Results and Discussionsupporting

confidence: 92%

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What levels of informality tackle poverty in Africa? Evidence from dynamic panel threshold analysis

Bolarinwa

Munacinga

2023

AJEMS

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PurposeThe paper validates the threshold argument in the informality–poverty nexus. Recent literature and policy have argued the existence of a threshold in the relationship.Design/methodology/approachThe study adopts dynamic panel threshold analysis, estimated within the framework of system Generalized Method of Moments (SGMM) to control for endogeneity and simultaneity. Data from 40 selected sub-Saharan African countries between 1991 and 2018 are used for the study.FindingsEmpirical results confirm the existence of an average threshold of 31% share of informality in GDP. Also, the paper finds that threshold of informality that addresses mild and severe poverty varies between 24.32 and 36.75%.Research limitations/implicationsThe work is limited to African economies. Evidence from other emerging and developed economies is suggested for further research.Practical implicationsOverall, the empirical results indicate a threshold in the informality–poverty nexus. Therefore, an excessive informality level does not benefit the African growth process. Policymakers and governments are advised to operate within the bounds of the threshold of informality that reduces poverty and improve the African economic growth process.Originality/valueThe paper is the first study to provide empirical findings on the nonlinear and threshold argument in the informality–poverty nexus, as far as the authors know.

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Section: Empirical Results and Discussionsupporting

confidence: 92%

“…The result is statistically significant and verified for severe and mild poverty status. Overall, the findings agree with the general view in the literature that the magnitude of economic activities in the informal sector increase poverty (Canelas, 2019; Pham, 2022; Bolarinwa and Simatele, 2022).…”

Section: Empirical Results and Discussionsupporting

confidence: 91%

What levels of informality tackle poverty in Africa? Evidence from dynamic panel threshold analysis

Bolarinwa

Munacinga

2023

AJEMS

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“…Ultimately, the extra‐legal conditions emblematic of informal settlements may lead authorities to evict the residents, resulting in loss of property and homelessness (Galiani & Schargrodsky, 2010; Talukdar, 2018). Accordingly, sustainable urban development is contingent on state recognition of the legality of settlements and informal urban development thus has critical implications for SDG 1: No Poverty, SDG 3: Good Health and Wellbeing, SDG 6: Clean Water and Sanitation, and SDG 11: Sustainable Cities and Communities (Bolarinwa & Simatele, 2022; Özgür et al, 2021; Satterthwaite et al, 2020). This is particularly relevant in the context of sub‐Saharan Africa, where high urban population growth rates, limited state capacity to administer the urban growth, and high poverty rates have resulted in the majority urban population residing in informal settlements (Jenkins & Mottelson, 2020).…”

Section: Informal Housing Marketsmentioning

confidence: 99%

“…Informal settlement can challenge long‐term sustainability as unregulated urban development and lack of state recognition can lead to undesirable living conditions such as unsafe construction, inadequate provision of basic infrastructure, and insecure tenure (Diep et al, 2021; Martins & Saavedra Farias, 2019). Because of these conditions, informal settlements are predominantly inhabited by low‐income groups and the informal housing sector is linked to several key areas for sustainable development, such as SDG 1: No Poverty, SDG 3: Good Health and Wellbeing, SDG 6: Clean Water and Sanitation, and SDG 11: Sustainable Cities and Communities (Bolarinwa & Simatele, 2022; Özgür et al, 2021; Satterthwaite et al, 2020). However, knowledge gaps on the relation between mainstream public policy approaches to informal urban development and livelihood outcomes of residents of the informal housing sector remain critical barriers of sustainable development in contexts characterized by rapid urbanization and limited public resources to administer the urban development.…”

Section: Introductionmentioning

confidence: 99%

“…No Poverty, SDG 3: Good Health and Wellbeing, SDG 6: Clean Water and Sanitation, and SDG 11: Sustainable Cities and Communities (Bolarinwa & Simatele, 2022;Özgür et al, 2021;Satterthwaite et al, 2020). However, knowledge gaps on the relation between mainstream public policy approaches to informal urban development and livelihood outcomes of residents of the informal housing sector remain critical barriers of sustainable development in contexts characterized by rapid urbanization and limited public resources to administer the urban development.…”

Section: Introductionmentioning

confidence: 99%

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On informal housing supply restrictions and livelihood in informal settlements: Implications for sustainable development

Mottelson

2023

Sustainable Development

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Land use restrictions can curtail housing supply and lead to increased costs of accommodation, which can have adverse effects on livelihood among low‐income groups and thereby compromise sustainable development. However, limited studies have investigated housing supply restrictions in informal housing markets. To address this knowledge‐gap, this article analyzes a range of indicators of livelihood among residents of informal settlements and informal housing supply restrictions in Maputo, Mozambique and Nairobi, Kenya. The findings underscore that informal urban development is restricted to a far higher extent and livelihood in informal settlements is considerably more compromised in Nairobi compared to Maputo, despite that wages are higher in Nairobi and geographic factors likely curtail urban development to a higher extent in Maputo. The empirical evidence and economic theory reviewed in this article consistently indicate that antagonistic approaches to informal urban development in cities with large segments of the population financially excluded from the formal housing markets have comparable consequences to land use restrictions guiding formal urban development. Namely, that informal land users pay a price premium for basic shelter in such contexts due to the increased pressure on the housing markets and risk of loss of investments through forced evictions. On this basis, the article argues that unless viable legal housing alternatives are available, repressive approaches to informal urban development should be abolished while less restrictive standards for building and planning regulation should be adopted to expand provision of affordable legal accommodation and thereby enhance sustainable development.

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How does globalisation affect informality in sub‐Saharan African countries?

Simatele,

Bolarinwa

2024

Sustainable Development

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This paper examines the intricate informality‐globalisation nexus in the sub‐Saharan African context using 30 African countries. Using the Method of Moments Quantile Regression approach (MM‐QR), this study analyses the nexus using three measures of globalisation: overall, economic and trade globalisation. Furthermore, the mediating role of institutional quality is explored using five dimensions of institutional quality. The empirical results confirm a negative relationship across different measures of globalisation and different quantiles, signifying that increased globalisation tends to suppress informal economic activities. Moreover, the interactive models of globalisation and institutional quality also validate the negative relationship in the nexus. The investigation into the dimensions of institutional quality underscores their importance in shaping informality dynamics. The ‘law and order’ dimension demonstrates a notable role in reducing informality, emphasising the significance of robust legal frameworks and effective governance structures in fostering formal economic activities. Simultaneously, the adverse impact of corruption on informality highlights the need for concerted efforts to combat corruption for the sake of encouraging formalisation and economic development. By utilising the Method of Moments Quantile Regression method, this paper offers a nuanced perspective that considers variations across different segments of the informality distribution. This approach enhances our understanding of the heterogeneity in the effects of globalisation and institutions on informality within the African context. In conclusion, this paper advances the discourse on the informality‐globalisation nexus by incorporating the mediating influence of institutional quality. The findings underscore the multifaceted nature of the relationship and emphasise the need for holistic policy interventions that address both globalisation and institutional dimensions. By shedding light on the intricate web of factors impacting informality, this study provides a foundation for evidence‐based strategies aimed at sustainable economic development and inclusive growth across African nations.

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Informality and poverty in Africa: Which comes first?

Cited by 10 publications

References 30 publications

What levels of informality tackle poverty in Africa? Evidence from dynamic panel threshold analysis

What levels of informality tackle poverty in Africa? Evidence from dynamic panel threshold analysis

On informal housing supply restrictions and livelihood in informal settlements: Implications for sustainable development

How does globalisation affect informality in sub‐Saharan African countries?

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