Title: Determinants of the informal economy of an emerging economy: a multiple indicator, multiple causes approach
Authors: Eghosa Igudia; Rob Ackrill; Simeon Coleman; Carlyn Dobson
Northampton Business School, The University of Northampton, UK
Nottingham Business School, Nottingham Trent University, UK
School of Business and Economics, Loughborough University, UK
Hull University Business School, University of Hull, UK
Abstract: Positing the implementation of evidenced-based policies to manage the informal economy, our paper employs, in a novel way, the multiple-indicator, multiple-cause model and primary data, to identify the determinants of the Nigerian informal economy. Building on previous literature, relevant determinants of the informal economy were constructed from participants' responses to questions designed to solicit such information. We found the factors responsible for the origin and expansion of the Nigerian informal economy to include: unemployment, a need to be autonomous/self-employed, corruption of government officials/agencies, participants' desire to pay less tax, and participants' need to survive. The greatest influence, in terms of magnitude and impacts, comes from the 'participants' need to survive' factor, followed by corruption. Our policy recommendations follow these identified factors, and recognise the positive and important role played by the informal economy. Although country-specific, our findings/recommendations may be used to inform policy in other countries with similar economic structures as Nigeria.
Keywords: determinants; informal economy; Nigeria; MIMIC approach; informal sector policies; shadow economy; emerging economies; unemployment; self-employment; corruption; taxation; survival needs.
Int. J. of Entrepreneurship and Small Business, 2016 Vol.28, No.2/3, pp.154 - 177
Submission date: 30 Apr 2015
Date of acceptance: 15 Jul 2015
Available online: 18 May 2016