The effect of the informal economy on bilateral exports from sub-Saharan African countries

Abstract

The purpose of this study is to analyse the impact of the informal economy on bilateral exports in sub-Saharan African countries. We use a gravity model, to which we add indicators of the informal economy and indicator variables for different economic regions. The study used Pseudo-Poisson Maximum Likelihood (PPML) and Heckman estimation techniques on data from the period 2002–2018. The results show that the informal economy has a negative impact on bilateral inter-community exports and a positive impact on bilateral intra-community exports. These results thus support the idea that the informal economy can accelerate the integration of regional economic communities and ultimately facilitate the establishment of bilateral export free trade areas at the continental level.