Is the Informal Sector Constrained from the Demand Side? Evidence for Six West African Capitals

Employing a unique dataset that covers households from six West African capitals, this paper provides new evidence on the demand for informal sector products and services. We first investigate whether demand linkages exist between formal and informal products and distribution channels. In a second s...

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Bibliographic Details
Published in:World development 2012-07, Vol.40 (7), p.1369-1381
Main Authors: Böhme, Marcus, Thiele, Rainer
Format: Article
Language:English
Subjects:
Africa
Capital cities
Consumption
Distribution
Distribution channels
Economic models
Elasticity of demand
Engel curve estimates
Evidence
formal–informal linkages
Households
Income
Informal economy
Informal sector
Products
Propensity to consume
Studies
West Africa
West African capitals
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Summary:Employing a unique dataset that covers households from six West African capitals, this paper provides new evidence on the demand for informal sector products and services. We first investigate whether demand linkages exist between formal and informal products and distribution channels. In a second step, we estimate demand elasticities based on Engel curves. We find strong demand-side linkages between the formal and informal sector, with the exception that informal goods are hardly bought through formal distribution channels. The estimated demand elasticities tend to show that rising incomes are associated with a lower propensity to consume informal sector goods and to use informal distribution channels.
ISSN:0305-750X
1873-5991
DOI:10.1016/j.worlddev.2011.12.005