Informal sector dynamics in times of fragile growth : The case of Madagascar

J Vaillant, Michael Grimm, J Lay, F Roubaud

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Abstract

This article examines the dynamics of the informal sector in Madagascar during the 1995–2004 period, which was characterized by sustained growth that ended due to a major political crisis. As conventionally assumed by simple dualistic models, the informal sector indeed fulfils a labor-absorbing function in times of crisis. However, informal business creation was also a major trend both during macroeconomic growth and during crisis and recovery. Growth in the informal sector was mostly extensive, with little job creation or capital accumulation. Although such a situation would be consistent with the existence of poverty traps, estimated marginal returns to capital are decreasing, which tends to reject this hypothesis.
Original languageUndefined/Unknown
Pages (from-to)437-455
Number of pages19
JournalEuropean Journal of Development Research
Volume26
Issue number4
DOIs
Publication statusPublished - 7 Aug 2014

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