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The Role of the Informal Sector in Investment in Sub-Saharan Africa

November 20, 2007

By Roseline Misati

For a long time, economic researchers condemned the existence of a huge informal sector in economies, viewing it as a deterrent to investment, growth and development. This view is being confronted with intense criticism particularly in developing countries where formal unemployment is rapidly growing and poverty widely spreading, which in turn is leading to an expanding informal sector. This paper empirically examines the linkages between the informal sector and investment, and argues that creation of wealth and poverty reduction in Sub-Saharan Africa is associated with a larger informal sector. In order to enhance the role of the informal sector, this paper suggests intensified focus on the sector in development programs, review of legislations that affect the informal sector and a greater focus on this sector by donors and development partners.

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Read More: Development, Economy, Governance, Jobs, Africa

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