Informal retailing through home-based micro-enterprises: The role of spaza shops

The informal trade sector constitutes an important part of the South African economy, with estimated sales of R32 billion in 2002. Its emergence is largely attributed to the divergence between the growth in population, especially the urban population, and employment growth in the formal economy. Growth of informal enterprises, especially in the retail sector, is also thriving on the demand of less affluent households, whose household needs for unsophisticated and affordable products are aptly supplied by the informal sector. The aim of this article is to focus on one of the prominent sub-sectors of informal retailing, namely spaza or tuck shops, defined as small retail businesses which operate from a residential stand or home. Particular attention is paid to the size, role and characteristics of spaza trade in South Africa, which is estimated to account for nearly 3 per cent of South Africa's retail trade.     

A panel data analysis of the formal-informal sector labour market linkages in South Africa

This study explores the labour market linkages between the informal and formal sectors, using the first four waves of the National Income Dynamics Study data. The main focus is on three groups of employed: worked in the formal sector in all waves; worked in the informal sector in all waves; moved between the two sectors across the waves. Only 27% of informal sector workers in wave 1 transitioned to the formal sector in wave 4; 38% remained in the informal sector while 33% had their status changed to either inactive or unemployed. The econometric analysis indicates that older and more educated individuals living in urban areas and coming from households with fewer old-age grant recipients are significantly more likely to work in the formal sector, whereas more educated white males are associated with a significantly greater likelihood of transitioning from informal to formal sector employment.     

Tax Policies and Informal Employment: The Asian Experience

This paper develops and estimates a model linking tax policies to the size of the informal sector. Our results suggest that informal employment responds to the strength of enforcement and, to a lesser extent, to tax rates. Looking across sectors, we find service sector informal employment responds to both changes in tax rates and enforcement, while manufacturing sector informal employment responds only to enforcement. Quantitatively, changes in enforcement affect the manufacturing informal sector more than the service sector. These results are robust to various measures of informal employment and hold for other countries outside of Asia as well. Since informal employment (and hence output) is related to a country's GDP, these results suggest that policy makers should consider the effect of their policies on the size of the informal sector.
JEL classification : O 17; O 53; H 26     

Poverty in Zambia: Levels,patterns and trends

This article presents the results of the analysis of levels, patterns and trends in the incidence of poverty in Zambia between 1991 and 1998, based on data captured in nationally representative surveys. In 1998, about 73 per cent of the households in Zambia were poor, the majority of which were extremely poor. Most poor households were in rural areas, with wide inter- and intra-provincial and district variations. The incidence of poverty also varied according to employment status and sector, as well as by district, gender, marital status, education and stratum of head of the household. In general, households headed by females, those without any formal education, unpaid family workers, the inactive, the self-employed, and those in agriculture, forestry and fishing recorded the highest incidence of poverty, with those employed in private households being affected the worst. In spite of the general increase in poverty nationally, most rural provinces registered declines while urban areas experienced increases in the incidence of poverty during the period under review. Furthermore, except for the agricultural/forestry, mining and quarrying, and electricity and gas sectors, the incidence of poverty increased in all the other sectors while remaining almost the same in the real estate sector. The direction and magnitude in the incidence of poverty between 1991 and 1998 were also associated with gender, education, employment status, employment sector, and residence of head of the household, as well as size of the household. Based on the analysis, the article strongly recommends revision in the measurement of poverty, investigation of the types of coping strategies adopted by the poor, and the extent to which these impact on the general well-being and productivity of vulnerable households in Zambia. The need for more qualitative data has also been highlighted.     

The Influence of Government Policies on Informal Labor: Implications for Long-Run Growth

Using cross-sectional data from industrialized and developing economies, we examine long-run growth regressions linking government policies, informal employment and real GDP per worker. We find that changes in government policies of taxation and enforcement significantly affect growth in the informal sector. Further, we show that increases (decreases) in informal employment significantly and negatively (positively) affect a country's growth rate of real GDP per worker. The empirical link between government policies, informal employment and real GDP per worker holds irrespective of a country's development. On average, changes in government policies, through their effect on the size of the informal sector, account for 6 percent of the growth rate of real GDP per worker between 1960 and 1990.     

The prospects for informal small businesses in KwaMashu

Government and business interest in the informal sector has been aroused by the sector's perceived ability to provide employment and thus lessen the politically destabilizing effects of unemployment. In the light of research carried out in a black township near Durban, the possible effects of deregulation on the development of the informal sector are examined. It is suggested that, since the sector's principal role was found to be to supplement an often meagre formal sector wage and there were few opportunities for capital accumulation, deregulation alone would be insufficient to promote growth of the sector.     

Rural Nonfarm Employment and Incomes in Latin America: Overview and Policy Implications

Rural nonfarm employment (RNFE) and incomes (RNFI) are crucial to Latin American rural households. The 11 rural household income studies in this volume, reviewed in this paper, use 1990s data and show that RNFI averages 40% of rural incomes. RNFI and RNFE have grown quickly over the past three decades. The review of evidence provided some surprising departures from traditional images of nonfarm activities of Latin American rural households. In terms of shares of rural incomes: (1) nonfarm wage incomes exceed self-employment incomes; (2) RNFI far exceeds farm wage incomes; (3) local RNFI far exceeds migration incomes; (4) Service-sector RNFI far exceeds manufactures RNFI. These findings suggest the need for more development program attention to wage employment in the service sector, versus the traditional focus on small enterprise manufactures. Moreover, poor households and zones tend to have higher shares in their incomes but lower absolute levels of RNFI as compared to richer households and zones. The RNFE of the poor tend to be the low-paid nonfarm equivalent of semi-subsistence farming. Raising the capacity of the poor to participate in the better-paid types of RNFE is crucial — via employment skills training, education, infrastructure, credit. Finally, RNFE has grown fastest and been most poverty-alleviating where there are dynamic growth motors, in particular in the agricultural sector, but also in tourism, links to urban areas, mining and forestry. This means that developing RNF jobs cannot be done at the expense of programs promoting agricultural development.     

Rural Development Finance in Vietnam: A Microeconometric Analysis of Household Surveys

This study examines (a) the rural household participation in the Vietnamese rural credit market, (b) the behavior of a formal lender in response to the credit needs of households, and (c) the impact of credit. The rural credit market in Vietnam is quite segmented. The formal sector specializes in lending for production purposes whereas the informal sector's lending is quite diverse. We show that rural households are rational in deciding which sources to ask for a particular kind of loan. Reputation, the dependency ratio of households, and the amount of credit applied for by the household are identified as the determinants of credit rationing by the bank. Credit is shown to have a significant impact on household production.     

Childcare availability,household structure,and maternal employment

We estimate the causal effects of childcare availability on the maternal employment rate using prefecture panel data constructed from the Japanese quinquennial census 1990–2010. We depart from previous papers on Japan by controlling for prefecture fixed effects, without which the estimates can be severely biased upward. Contrary to popular belief, childcare availability is uncorrelated with maternal employment when prefecture fixed effects are controlled. Evidence suggests that this is because households shift from using informal childcare provided by grandparents to the accredited childcare service, as more and more households do not live with grandparents. If this change of the household structure did not occur, the growth of childcare availability would have increased the maternal employment rate by two percentage points, which accounts for about 30% of the growth in the maternal employment rate from 1990 to 2010.     

Labour market dimensions of poverty in Indonesia

This paper focuses on labour market issues relevant to poverty alleviation. Patterns of participation, unemployment and employment are examined among the poor compared with the non-poor in general, among urban and rural households, and among various socio-demographic groups. Using data from the 2002 National Socio-Economic Survey, the paper finds that low participation in the workforce and high unemployment, while important, are less closely related to poverty status than expected, especially among spouses of household heads. However, sector of employment and underemployment are closely associated with poverty, especially for those in informal jobs in urban areas; in rural areas, the poor are heavily concentrated in agriculture. Among the poor, young people and females are more likely to be underemployed and to work in agriculture than prime-age workers. The data suggest that labour market policies that tend to protect those in formal sector employment are unlikely to reduce poverty much, if at all.     

Formal and informal rural credit in the Mekong River Delta of Vietnam: Interaction and accessibility

This paper examines the factors influencing rural households’ access to credit in the Vietnamese market. Analysis confirms an interaction effect between informal and formal credit sectors in which informal credit positively influences accessibility to microcredit programs. Ignoring this interaction effect may lead to microcredit providers making loan decisions that are less than optimal. In the formal credit sector, the lowest income group faces more credit rationing than other groups, despite the fact that microcredit programs are designed to target households at the bottom of the income pyramid. Results demonstrate that land holding status, informal interest, and informal loan duration are important factors influencing access to informal credit. Factors influencing microcredit accessibility include local government employee status, credit group membership, a “poor” certificate, educational attainment, working skills and village road access. To reduce reliance on informal credit and improve microcredit accessibility, rural households should actively participate in a microcredit group.     

Service provision for street-based traders in Pietermaritzburg,KwaZulu-Natal: comparing local findings to lessons drawn from Africa and Asia

South Africa's informal economy absorbs approximately one-quarter of the labour force of 15 million people and is therefore the fastest growing sector of employment. Street-based trading constitutes a major subsector within the informal economy and is continuously expanding through unrelenting proliferation of survivalist micro-enterprises. However, few organisations that support enterprises are accessible or appropriate to survivalist and informal sector micro-enterprises. Interviews were conducted with 98 Pietermaritzburg street-based traders and ten KwaZulu-Natal service providers to determine service provision requirements. The results are compared with findings of four international studies. The findings suggest that for survivalist enterprises to benefit from entrepreneurial education and training services, obstacles with regard to South African traders' understanding of entrepreneurship and cultural limitations to enterprise growth should be overcome. Service institutions also require incentives to serve the informal sector, as well as the capacity to design and deliver appropriate services.     

Examining employment discrimination in South Africa, 1997–2016

This study examines employment discrimination by race and gender in 1997–2016 by employing a sample that represents the labour force (excluding informal sector workers, agricultural workers, domestic workers, self-employed and employers) aged between 15 and 65 years. Probit models are conducted to estimate labour force participation, employment and occupational attainment likelihoods. This is followed by the Oaxaca–Blinder decomposition, and the results indicate that the unexplained component of the white–African employment probability gap reveals a downward trend in absolute terms in 2002–2014, but in relative terms it still accounts for about 50% of the gap in 2016. The unexplained component is most dominant in the male–female employment gap decomposition. While these results suggest that employment discrimination (unexplained component) against Africans and females remains serious, the improvement of education and skills level of the workseekers (explained component) from the previously disadvantaged groups remain crucial to improve their employment prospects.     

Counting the Invisible Workforce: The Case of Homebased Workers

This paper illustrates the limitations of offical statistics on the informal sector with the case of homebased women workers: this is, women who work from their homes as own-account producers or subcontract workers. After noting that official statistics in most countries do not classify homebased subcontract work as such, the authors review the available data on both types of homebased work. The available evidence suggests that homebased work is an important source of employment throughout the world, especially for women, and that homebased workers comprise a significant share of the workforce in key export industries. The evidence also shows that the informal sector often has direct ties to the formal sector and is growth-promoting. The case of homebased workers, the authors conclude, illustrates the need for improved informal sector statistics as well as a better understanding of the impact of policies on the informal sector and the contribution of the informal sector to national economies.     

Do migrants get stuck in the informal sector? Findings from a household survey in four Indonesian cities

This article compares labour-market outcomes for individuals in migrant and non-migrant households in Indonesia. It introduces two new work-status groups – small-business operators and formal-casual or contract employees – in an effort to transcend the usual formal–informal distinction. We find that long-term migrants (LTMs) tend to gravitate to the small-business sector and to jobs with regular wages, whereas recent and very recent migrants are more likely to work in the informal sector. Our findings on the labour-market outcomes of successive generations of migrants are less conclusive. While a larger proportion of LTM children than that of their parents work in the formal sector, the children of migrant heads of households are less likely than those of non-migrants to find formal-sector jobs. We also find that distortionary labour-market regulations appear to diminish the overall benefits of migration.     

Towards accommodationist planning in South Africa's secondary centres: The case of hawker deregulation

International development agencies are devoting increased attention to the role of secondary or intermediate cities in national urban development strategies. In planning the development of intermediate‐sized centres, stress is placed on the need to support indigenous enterprise, including the informal sector. Against a background review of literature concerning the informal sector within secondary cities, this paper examines the extent to which a group of South Africa's intermediate‐sized cities are pursuing programmes supporting the informal sector. The question of policies towards hawking is investigated within the settings of East London, Kimberley, Bloemfontein, Pietersburg and Pietermaritzburg. It is concluded that accommodationist planning is being undertaken on only a limited scale in these secondary centres.     

Rural Informal Taxation in China： Historical Evolution and an Analytic Framework

The present paper examines the historical evolution of China's rural taxation system from the pre-reform period to the late 1990s. We propose that because of information asymmetry between the upper-level and the lower-level governments, local governments had to be granted some informal tax autonomy to fulfill the upper-level policy mandates. This easily led to excessive local informal taxation on farmers. As market liberalization of the grain sector progressed, the low-cost tax instruments implemented through the traditional approach of implicit taxation gradually eroded. Local governments in agricultural regions had to resort to informal fees collected directly from individual rural households while the more industrialized regions shifted to non-agricultural taxes that are less costly in terms of tax collection. Hence, political tension between farmers and local governments in agriculture- based regions emerged and rural tax reform became necessary.     

MINIMUM WAGE POLICY AND ITS IMPACT ON EMPLOYMENT IN THE URBAN FORMAL SECTOR

Since the late 1980s, minimum wages have become an important plank of the Indonesian government's labour policy. Their levels have increased faster in real terms than those of average wages and per capita gross domestic product and, as a result, minimum wages have become binding for the majority of formal sector workers. This study finds that the imposition of minimum wages has a negative and statistically significant impact on employment in the urban formal sector. The disemployment impact is greatest for female, young and less educated workers, while the employment prospects of white-collar workers are enhanced by increases in minimum wages. Some workers who lose jobs in the formal sector and have to relocate to the informal sector face lower earnings and poorer working conditions.     

Dairy farming,cooperatives and livelihoods: lessons learned from six indian villages

India's dairy sector has emerged as the world's largest dairy producer and has enabled 70 million farmers to generate income through its rapid growth. This success is linked to broad national policy support through the Operation Flood program and the emergence of an inclusive model of cooperatives. However, the informal sector is still the marketing channel most used by dairy producers, and with the liberalization of the dairy sector, the cooperative model is also facing competition from the private sector. By surveying 244 dairy farmers in two major but heterogeneous states in India, this paper examines the inclusiveness of the sector and the impact of dairy cooperative membership on farmers’ income and livelihood. The originality of the paper concerns its systematic perspective on households’ assets and activities. The results indicate that cooperative membership is associated with caste membership and farmers collection centers. Better incomes are associated with membership, particularly among farmers with less land and among smallholders, who are more dependent on their dairy income to lift themselves out of poverty.     

A quantitative perspective on the informal sector in Southern Africa

This research note forms part of an on‐going study on the informal sector entitled ‘A quantitative and qualitative assessment of the informal sector’. Attention is directed here at the employment and income generating capacity of informal sector activities in Southern Africa. A need for data revealing this potential contribution of the informal sector exists because no country‐wide study has so far been conducted. The note is published in the expectation that it will generate comments which could provide added insight on an important aspect of development in Southern Africa.