Informal work in sub-Saharan Africa: Dead end or stepping-stone?

Danquah, Michael; Schotte, Simone; Sen, Kunal

doi:10.2478/izajodm-2021-0015

Figures & Tables

Work status classification.Source: Authors’ own construct.

Labor income dynamics.Note: Each point shows the estimated marginal effect on changes in log earnings by initial and destination employment state, with “Informal Lower” and “Wage Employed” being the base categories. The dashed lines show the 95% confidence intervals.Source: Authors’ own calculations based on survey data from GSPS 2009/10-2013/14, NIDS 2014/15-2017, TZNPS 2010/11-2012/13, and UNPS 2010/11-2011/12.

ANOVA of log mean labor income (in 2005 PPPs) across work status groups.Note: Coefficient estimates and 95% confidence interval of fitted one-way ANOVA model of log mean labor income using formal self-employment as the base category, controlling for wave fixed effects.Source: Authors’ own calculations based on survey data from GSPS 2009/10-2013/14, NIDS 2014/15-2017, TZNPS 2010/11-2012/13, and UNPS 2010/11-2011/12. GSPS, Ghana Socioeconomic Panel Study Survey; NIDS, National Income Dynamics Study; PPP, Purchasing power parity; TZNPS, Tanzania National Panel Study; UNPS, Uganda National Panel Study.

Marginal effect on employment transition probabilities, by country and destination state.Note: Average marginal effects estimated from same model specification and controls as in Table 3 but including interactions between the initial work status and country fixed effects. Each point shows the estimated marginal effect on the employment transition probability by country and destination state, with “lower-tier informal self-employed” being the base category in each country. The dashed lines show the 95% confidence intervals. Work status abbreviations: F, formal, IF U, informal upper-tier, IF L, informal lower-tier; SE, self-employed; WE, wage employed.Source: Authors’ own calculations based on survey data from GSPS 2009/10-2013/14, NIDS 2014/15-2017, TZNPS 2010/11-2012/13, and UNPS 2010/11-2011/12. GSPS, Ghana Socioeconomic Panel Study Survey; NIDS, National Income Dynamics Study; TZNPS, Tanzania National Panel Study; UNPS, Uganda National Panel Study.

Coefficient estimate on change in log earnings, split-sample regressions.Note: Coefficient estimates based on same model specification and controls as in Table B10, but splitting the sample by initial formality status (formal, upper-tier informal, lower-tier informal) and initial occupational position (wage employed, self-employed). Standard errors have been clustered at the country level. Each point shows the estimated marginal effect on log earnings by employment state, with “Informal Lower” and “Wage Employed” being the base categories. The dashed lines show the 95% confidence intervals.Source: Authors’ own calculations based on survey data from GSPS 2009/10-2013/14, NIDS 2014/15-2017, TZNPS 2010/11-2012/13, and UNPS 2010/11-2011/12. GSPS, Ghana Socioeconomic Panel Study Survey; NIDS, National Income Dynamics Study; TZNPS, Tanzania National Panel Study; UNPS, Uganda National Panel Study.

Coefficient estimate on log earnings, panel fixed effects regression.Note: Coefficient estimates based on fixed effects panel regression, controlling for individual's age and age squared and country-time fixed effects. Standard errors have been clustered at the country level. Each point shows the estimated marginal effect on log earnings by employment state, with “Informal Lower” and “Wage Employed” being the base categories. The dashed lines show the 95% confidence intervals.Source: Authors’ own calculations based on survey data from GSPS 2009/10-2013/14, NIDS 2014/15-2017, TZNPS 2010/11-2012/13, and UNPS 2010/11-2011/12. GSPS, Ghana Socioeconomic Panel Study Survey; NIDS, National Income Dynamics Study; TZNPS, Tanzania National Panel Study; UNPS, Uganda National Panel Study.

Transition matrices across work status groups

				WAVE t = 1						Share of stayers

				Wage employed			Self-employed

				Formal	Informal		Formal	Informal

					Upper	Lower		Upper	Lower
a) Ghana

WAVE t = 0	Wage employed	Formal		65.1	6.9	9.6	4.3	3.6	10.6	8.6
		Informal	Upper	33.0	11.8	23.7	2.5	3.2	25.8	0.6
		Informal	Lower	21.7	5.3	32.2	7.5	6.4	26.9	6.1
	Self-employed	Formal		2.1	3.4	12.1	29.5	15.8	37.1	2.6
		Informal	Upper	4.0	2.5	15.2	14.7	44.7	18.9	5.3
		Informal	Lower	2.1	2.0	15.8	6.8	6.3	67.2	28.1
	TOTAL			21.0	4.5	18.4	9.1	11.2	35.8	51.3

b) South Africa

WAVE t = 0	Wage employed	Formal		83.3	7.1	5.8	2.2	1.1	0.5	47.2
		Informal	Upper	50.1	25.1	14.7	6.0	1.0	3.1	2.2
		Informal	Lower	26.4	13.1	47.7	4.7	3.9	4.3	10.2
	Self-employed	Formal		13.0	9.7	5.1	50.8	13.3	8.1	2.0
		Informal	Upper	12.2	11.1	19.5	16.1	23.5	17.6	1.3
		Informal	Lower	14.7	6.2	16.8	6.9	24.6	30.8	1.1
	TOTAL			63.4	9.9	14.9	5.2	3.4	3.1	64.0

c) Tanzania

WAVE t = 0	Wage employed	Formal		79.7	4.4	9.7	1.5	1.0	3.6	9.3
		Informal	Upper	45.8	5.8	33.1	6.5	2.9	6.0	0.2
		Informal	Lower	14.8	0.9	62.4	2.9	3.5	15.5	17.9
	Self-employed	Formal		2.0	0.0	5.0	31.7	18.2	43.1	2.9
		Informal	Upper	4.5	0.0	21.8	15.2	23.1	35.4	0.9
		Informal	Lower	5.8	1.5	15.3	8.3	4.1	64.9	28.2
	TOTAL			22.2	1.8	27.3	8.6	6.0	34.2	59.3

d) Uganda

WAVE t = 0	Wage employed	Formal		58.0	27.0	8.1	5.2	0.0	1.7	6.8
		Informal	Upper	20.0	48.3	14.1	5.7	6.1	5.9	5.2
		Informal	Lower	4.7	6.2	68.3	2.7	4.3	13.9	17.7
	Self-employed	Formal		2.7	0.0	10.5	20.7	15.0	51.1	0.6
		Informal	Upper	0.0	4.6	5.0	13.9	39.8	36.8	2.3
		Informal	Lower	2.2	1.0	11.9	4.4	7.2	73.2	31.2
	TOTAL			14.8	13.3	24.3	5.7	7.9	34.1	63.9

Distribution of workers by work status (%), extended definition

			Ghana	South Africa	Tanzania	Uganda
a) Proportion of employment by work status (incl. family farms and unemployment)

Wage employed	Formal		6.8	44.3	3.9	4.0
	Informal	Upper	2.8	7.0	1.1	3.7
	Informal	Lower	9.8	16.7	9.5	8.8

Self-employed	Formal		4.6	3.1	3.0	1.1
	Informal	Upper	6.2	4.2	1.3	2.0
	Informal	Lower	21.7	2.9	14.4	14.5

Family farms			43.4	0.9	65.5	65.0
Unemployment			4.8	21.0	1.3	1.0
TOTAL			100	100	100	100

b) Proportion of formal vs. informal employment (incl. family farms as informal lower)

Formal			12.0	59.9	7.0	5.1
Informal	Upper		9.4	14.2	2.4	5.7
Informal	Lower		78.6	25.9	90.6	89.2
TOTAL			100	100	100	100

Basic socioeconomic, labor market and institutional indicators, 2010–2017

	Ghana	South Africa	Tanzania	Uganda
GDP per capita
Annual (constant 2017 PPP $)	4,505	12,731	2,256	2,004
Growth rate (annual %)	4.4	0.4	3.4	1.7
Sectoral contribution to GDP (% of GDP)
Agriculture	21.9	2.2	26.6	26.2
Industry	28.6	26.6	25.1	25.5
Services	42.8	61.1	40.6	42.0
Poverty headcount (% of population)
$1.90 a day (2011 PPP)	12.0	17.5	49.5	38.5
$3.20 a day (2011 PPP)	30.1	36.5	78.2	68.5
Educational attainment (% of population 25+ years) (cumulative)
At least completed primary	64.7	81.4	64.8	38.4
At least completed lower secondary	54.3	74.5	11.0	26.4
At least completed upper secondary	20.6	61.5	3.4	10.3
Sector employment (% of total) (modeled ILO estimate)
Agriculture	41.6	5.0	68.3	70.1
Industry	16.2	23.7	6.1	7.2
Services	42.2	71.3	25.5	22.6
Public sector employment
Public sector employment as a share of formal employment (%)	45.4	22.7	49.8	39.5
Union membership
Share of private paid employees with union membership (%)	17.5	20.4	9.4	3.0
Ease of doing business
Score (0 = lowest performance to 100 = best performance)	57.8	65.7	52.5	57.3
Number of start-up procedures to register a business	7.6	6.5	11.3	14.0
Days required to start a business	12.9	45.3	29.5	26.8
New business density (registrations per 1,000 people ages 15–64)	1.0	7.2	0.3	0.9
Quality of institutions
Governance quality index (1–10)	6.5	6.1	5.2	5.7
Regulatory performance in paying taxes (1–100)	66.3	81.2	53.8	73.0
Workers’ Rights (1–100)	79.0	86.0	71.0	70.0

Distribution of workers by work status (%)

			Ghana	South Africa	Tanzania	Uganda
a) Proportion of employment by work status

Wage employed	Formal		13.2	56.7	11.7	11.7
	Informal	Upper	5.3	8.9	3.3	10.8
	Informal	Lower	18.9	21.4	28.6	26.0
Self-employed	Formal		8.9	4.0	9.1	3.1
	Informal	Upper	11.9	5.4	3.9	5.8
	Informal	Lower	41.8	3.7	43.4	42.6
TOTAL			100	100	100	100

b) Proportion of formal vs. informal employment

Formal			22.1	60.6	20.7	14.9
Informal	Upper		17.2	14.3	7.2	16.6
Informal	Lower		60.7	25.1	72.0	68.6
TOTAL			100	100	100	100

c) Proportion of upper-tier informality in informal employment

Upper informal in total informal employment			22.1	36.4	9.1	19.4
Upper informal in informal self-employment			22.2	59.7	8.2	11.9
Upper informal in informal wage employment			22.0	29.4	10.5	29.4

Change in log labor earnings

	All countries		Excl. South Africa

Variables	(1)	(2)	(3)	(4)
Log labor earnings (t = 0)	−0.335^*** (0.057)	−0.334^** (0.058)	−0.375^* (0.123)	−0.375^* (0.124)

Formality status in t = 0 (base: Lower informal in t = 0)

Formal (t = 0)	−0.033 (0.037)	−0.033 (0.035)	0.018 (0.045)	0.016 (0.044)
Upper informal (t = 0)	−0.023 (0.023)	−0.025 (0.024)	0.016 (0.031)	0.021 (0.030)

Formality status in t = 0 and t = 1 (base: Lower informal in t = 0 and t = 1)

Formal (t = 0) × Formal (t = 1)	0.337^** (0.081)	0.330^** (0.077)	0.240 (0.101)	0.243 (0.110)
Formal (t = 0) × Upper informal (t = 1)	0.136 (0.076)	0.133 (0.073)	0.014 (0.080)	0.013 (0.087)
Upper informal (t = 0) × Formal (t = 1)	0.257^*** (0.029)	0.256^*** (0.030)	0.265^** (0.035)	0.260^** (0.045)
Upper informal (t = 0) × Upper informal (t = 1)	0.071 (0.057)	0.070 (0.056)	0.109 (0.118)	0.099 (0.121)
Lower informal (t = 0) × Formal (t = 0)	0.206^*** (0.022)	0.206^*** (0.021)	0.211^* (0.054)	0.212^* (0.054)
Lower informal (t = 0) × Upper informal (t = 0)	0.082^* (0.029)	0.095^* (0.033)	0.067 (0.062)	0.069 (0.045)

Employment status in t = 0 (base: Wage employed in t = 0)

Self-employed (t = 0)		0.045 (0.106)		−0.091^** (0.014)

Employment status in t = 0 and t = 1 (base: Wage employed in t = 0 and t = 1)

Self-employed (t = 0) × Self-employed (t = 0)		−0.090 (0.054)		−0.021 (0.041)
Wage employed (t = 0) × Self-employed (t = 0)		0.015 (0.104)		−0.067 (0.087)

Characteristics in t = 0

Level of education (base: No schooling)
Primary	0.058 (0.036)	0.061 (0.031)	0.076 (0.036)	0.076 (0.029)
Post-primary	0.103^** (0.022)	0.106^*** (0.018)	0.104^* (0.033)	0.108^* (0.032)
Secondary	0.205^*** (0.035)	0.207^*** (0.032)	0.212^* (0.054)	0.219^* (0.063)
Post-secondary	0.328^*** (0.039)	0.332^*** (0.037)	0.227^** (0.045)	0.236^** (0.055)
Tertiary	0.542^*** (0.089)	0.544^*** (0.088)	0.474^* (0.143)	0.482^* (0.154)
Age	0.005 (0.004)	0.004 (0.003)	0.004 (0.009)	0.003 (0.008)
Age squared (×0.01)	−0.004 (0.004)	−0.004 (0.004)	−0.002 (0.009)	−0.001 (0.008)
Female	−0.134^** (0.029)	−0.135^** (0.030)	−0.152 (0.082)	−0.157 (0.083)
Urban	0.076^** (0.023)	0.076^** (0.023)	0.095 (0.064)	0.100 (0.062)

Country (base: Uganda)

South Africa	0.110 (0.052)	0.102 (0.067)
Tanzania	0.073 (0.033)	0.067 (0.036)	0.096 (0.094)	0.097 (0.099)
Uganda	−0.014 (0.018)	−0.021 (0.023)	0.013 (0.058)	0.013 (0.065)

Sample selection

Panel retention From t = 0 to t = 1	−0.021 (0.029)	−0.018 (0.024)	−0.136 (0.149)	−0.140 (0.140)
Employed (non-farm) in t = 0	0.005 (0.010)	0.005 (0.011)	−0.044 (0.115)	−0.038 (0.114)
Constant	1.500^** (0.269)	1.504^** (0.269)	1.765^* (0.490)	1.805^* (0.484)
Observations	7,240	7,240	2,760	2,760
Adj. R²	0.371	0.376	0.382	0.384

Data sources

Country	Survey	t = 0	t = 1
Ghana	GSPS	Wave I (2009/10)	Wave II (2013/14)
South Africa	NIDS	Wave IV (2014/15)	Wave V (2017)
Tanzania	TZNPS	Wave II (2010/11)	Wave III (2012/13)
Uganda	UNPS	Wave II (2010/11)	Wave III (2011/12)

Employment dynamics, including inactivity/unemployment as an additional destination state

Multinomial logistic regression			Number of obs = 9,851

Average marginal effects on work status in t = 1			Log-likelihood = −12,048

Base outcome: Lower-tier informal wage employed			Pseudo R² = 0.284

Variables	(1)	(2)	(3)	(4)	(5)	(6)

	Formal wage employed	Upper-tier informal wage employed	Lower-tier informal wage employed	Formal self-employed	Upper-tier informal self-employed	Inactive/unemployed
Work status in t = 0 (base: lower-tier informal self-employed)

(1) Formal wage employed	0.584^*** (0.016)	0.051^*** (0.009)	−0.002 (0.020)	−0.070^*** (0.009)	−0.052^*** (0.018)	−0.271^*** (0.012)
(2) Upper-tier informal wage employed	0.264^*** (0.011)	0.168^*** (0.007)	0.084^*** (0.019)	−0.048^*** (0.009)	−0.038^** (0.017)	−0.210^*** (0.022)
(3) Lower-tier informal wage employed	0.130^*** (0.008)	0.053^*** (0.013)	0.228^*** (0.023)	−0.054^*** (0.010)	−0.028^* (0.015)	−0.137^*** (0.019)
(4) Formal self-employed	−0.006 (0.012)	0.006 (0.013)	−0.022^* (0.012)	0.195^*** (0.024)	0.051^* (0.027)	−0.168^*** (0.017)
(5) Upper-tier informal self-employed	0.008 (0.010)	0.023^** (0.011)	0.008 (0.023)	0.027^** (0.013)	0.151^*** (0.044)	−0.101^*** (0.038)

Level of education (base: no schooling)

Primary	0.035^** (0.016)	0.001 (0.007)	−0.065^** (0.027)	0.018^*** (0.005)	0.002 (0.004)	−0.003 (0.018)
Post-primary	0.093^*** (0.017)	0.012 (0.020)	−0.113^*** (0.032)	0.040^*** (0.004)	0.006 (0.005)	−0.021 (0.019)
Secondary	0.157^*** (0.024)	0.011 (0.017)	−0.157^*** (0.033)	0.042^*** (0.003)	0.001 (0.009)	−0.036^** (0.015)
Post-secondary	0.219^*** (0.028)	0.031^* (0.019)	−0.204^*** (0.035)	0.082^*** (0.017)	0.005 (0.010)	−0.072^*** (0.014)
Tertiary	0.329^*** (0.029)	0.013 (0.014)	−0.249^*** (0.040)	0.088^*** (0.032)	−0.009 (0.018)	−0.099^*** (0.023)
Age	0.015^*** (0.004)	0.002 (0.001)	−0.001 (0.001)	0.006^* (0.003)	0.002 (0.002)	−0.030^*** (0.006)
Age squared (×0.01)	−0.018^*** (0.004)	−0.003 (0.002)	−0.001 (0.001)	−0.006^* (0.004)	−0.003 (0.002)	0.038^*** (0.006)
Female	−0.050^*** (0.010)	0.016^*** (0.003)	−0.028^* (0.016)	−0.023^*** (0.003)	−0.019^*** (0.001)	0.078^*** (0.024)
Urban	0.012^*** (0.004)	−0.022^*** (0.005)	0.015 (0.016)	0.006 (0.007)	−0.009^*** (0.004)	0.018 (0.013)

Country (base: Ghana)

South Africa	0.085^*** (0.007)	0.020^*** (0.003)	−0.035^*** (0.008)	−0.020^*** (0.005)	−0.032^*** (0.002)	0.107^*** (0.006)
Tanzania	0.162^*** (0.017)	−0.021^*** (0.004)	0.030^*** (0.006)	0.026^*** (0.002)	−0.024^*** (0.004)	−0.188^*** (0.005)
Uganda	−0.053^*** (0.003)	0.100^*** (0.009)	0.042^*** (0.007)	−0.009^*** (0.002)	0.016^*** (0.002)	−0.151^*** (0.009)

Sample selection

Panel retention From t = 0 to t = 1	−0.037 (0.039)	−0.020^* (0.012)	−0.033^*** (0.012)	−0.012 (0.009)	−0.015^* (0.008)	0.031 (0.030)
Employed (non-farm) in t = 0	−0.034 (0.033)	−0.009 (0.013)	−0.003 (0.022)	0.001 (0.013)	−0.022^*** (0.007)	0.087 (0.056)

Employment transitions

Multinomial logistic regression			Number of obs = 7,816

Average marginal effects on work status in t = 1			Log-likelihood = −7,851.1291

Base outcome: Lower-tier informal wage employed			Pseudo R² = 0.3353

	(1)	(2)	(3)	(4)	(5)

Variables	Formal wage employed	Upper-tier informal wage employed	Lower-tier informal wage employed	Formal self-employed	Upper-tier informal self-employed
Work status in t = 0 (base: lower-tier informal self-employed)

(1) Formal wage employed	0.628^*** (0.028)	0.037^** (0.016)	−0.066^** (0.033)	−0.128^*** (0.014)	−0.096^*** (0.029)
(2) Upper-tier informal wage employed	0.293^*** (0.026)	0.192^*** (0.015)	0.044 (0.033)	−0.099^*** (0.014)	−0.078^*** (0.028)
(3) Lower-tier informal wage employed	0.153^*** (0.008)	0.062^** (0.024)	0.264^*** (0.042)	−0.104^*** (0.016)	−0.062^** (0.025)
(4) Formal self-Employed	−0.045^* (0.026)	−0.007 (0.023)	−0.079^*** (0.020)	0.227^*** (0.033)	0.043 (0.044)
(5) Upper-tier informal self-employed	−0.012 (0.024)	0.028 (0.022)	−0.023 (0.030)	0.016 (0.014)	0.201^*** (0.056)

Level of education (base: no schooling)

Primary	0.053^*** (0.018)	0.001 (0.009)	−0.089^*** (0.025)	0.023^*** (0.006)	0.001 (0.004)
Post-primary	0.121^*** (0.023)	0.011 (0.026)	−0.160^*** (0.033)	0.050^*** (0.005)	0.004 (0.005)
Secondary	0.196^*** (0.025)	0.008 (0.022)	−0.223^*** (0.034)	0.052^*** (0.003)	−0.002 (0.012)
Post-secondary	0.246^*** (0.028)	0.026 (0.022)	−0.283^*** (0.036)	0.096^*** (0.020)	−0.000 (0.012)
Tertiary	0.342^*** (0.024)	−0.001 (0.019)	−0.337^*** (0.041)	0.107^*** (0.038)	−0.016 (0.020)
Age	0.003 (0.003)	−0.002 (0.002)	−0.010^*** (0.003)	0.006 (0.004)	0.000 (0.002)
Age squared (×0.01)	−0.002 (0.004)	0.002 (0.003)	0.009^*** (0.003)	−0.006 (0.005)	−0.001 (0.003)
Female	−0.037^*** (0.009)	0.029^*** (0.003)	−0.008 (0.011)	−0.021^*** (0.005)	−0.016^*** (0.001)
Urban	0.029^*** (0.006)	−0.027^*** (0.007)	0.015 (0.018)	0.007 (0.009)	−0.013^*** (0.004)

Country (base: Ghana)

South Africa	0.122^*** (0.006)	0.037^*** (0.007)	0.005 (0.012)	−0.010 (0.006)	−0.020^*** (0.003)
Tanzania	0.112^*** (0.018)	−0.033^*** (0.004)	−0.019^*** (0.006)	0.017^*** (0.002)	−0.036^*** (0.005)
Uganda	−0.106^*** (0.005)	0.099^*** (0.010)	0.011 (0.007)	−0.018^*** (0.002)	0.007^*** (0.002)

Sample selection

Panel retention from t = 0 to t = 1	−0.044^** (0.020)	−0.019^** (0.009)	−0.026^* (0.015)	−0.007 (0.011)	−0.009 (0.013)
Employed (non-farm) in t = 0	0.011 (0.012)	−0.002 (0.021)	0.010 (0.022)	0.005 (0.014)	−0.025^** (0.010)

Employment dynamics, using ordered logistic regression

Ordered logistic regression, average marginal effects, split sample

	(1)		(2)		(3)

Formality status in t = 0	Lower-tier informal		Upper-tier informal		Formal

Formality status in t = 1	Formal	Upper-tier informal	Formal	Lower-tier informal	Upper-tier informal	Lower-tier informal
Variables

Employment status (base: Wage employed)

Self-employed	−0.036 (0.026)	−0.013 (0.012)	−0.122^** (0.057)	0.114^** (0.055)	0.081^*** (0.007)	0.185^*** (0.034)

Level of education (base: no schooling)

Primary	0.033 (0.020)	0.019^** (0.008)	0.022 (0.021)	−0.033 (0.035)	−0.034^* (0.020)	−0.125^* (0.073)
Post-primary	0.121^** (0.053)	0.056^*** (0.011)	0.117 (0.080)	−0.145 (0.109)	−0.069^*** (0.016)	−0.197^*** (0.055)
Secondary	0.208^*** (0.074)	0.077^*** (0.005)	0.238^*** (0.068)	−0.245^*** (0.093)	−0.092^*** (0.020)	−0.232^*** (0.055)
Post-secondary	0.281^*** (0.043)	0.084^*** (0.004)	0.328^*** (0.076)	−0.300^*** (0.096)	−0.114^*** (0.024)	−0.263^*** (0.059)
Tertiary	0.575^*** (0.064)	0.048^** (0.023)	0.554^*** (0.101)	−0.395^*** (0.084)	−0.133^*** (0.024)	−0.286^*** (0.054)
Age	0.003 (0.004)	0.001 (0.001)	0.013 (0.010)	−0.011 (0.009)	−0.004^** (0.002)	−0.007^** (0.003)
Age squared (×0.01)	−0.002 (0.004)	−0.001 (0.001)	−0.014 (0.009)	0.012 (0.009)	0.004^* (0.002)	0.006^* (0.004)
Female	−0.066^** (0.031)	−0.023^*** (0.005)	−0.014 (0.048)	0.013 (0.044)	0.019^*** (0.005)	0.034^*** (0.009)
Urban	0.021^* (0.012)	0.007 (0.006)	0.046^** (0.019)	−0.042^** (0.018)	0.001 (0.007)	0.003 (0.013)

Country (base: Ghana)

South Africa	0.102^*** (0.015)	0.036^*** (0.009)	0.068^*** (0.010)	−0.061^*** (0.010)	−0.058^*** (0.012)	−0.122^*** (0.004)
Tanzania	0.038 (0.031)	0.016^** (0.007)	0.027 (0.035)	−0.026 (0.033)	−0.049^*** (0.004)	−0.106^*** (0.008)
Uganda	−0.040^*** (0.010)	−0.021^* (0.012)	−0.080^*** (0.014)	0.090^*** (0.015)	0.013^*** (0.001)	0.045^*** (0.005)

Sample selection

Panel retention From t = 0 to t = 1	−0.144^* (0.082)	−0.049^*** (0.014)	−0.024 (0.044)	0.021 (0.040)	0.026^* (0.014)	0.045 (0.030)
Employed (non-farm) in t = 0	0.013 (0.023)	0.004 (0.009)	0.090^*** (0.030)	−0.082^*** (0.026)	0.025^* (0.014)	0.043^* (0.024)
Observations	2,869		1,166		3,781
Pseudo R²	0.0728		0.0614		0.1220

Transition matrices across work status groups, including additional destination states (family farms under lower-tier informal self-employment and unemployment)

				WAVE t = 1							Share of stayers

				Wage employed			Self-employed			Unempl.

				Formal	Informal		Formal	Informal

					Upper	Lower		Upper	Lower
a) Ghana

WAVE t = 0	Wage employed	Formal		59.0	6.2	8.7	3.9	3.2	16.7	2.2	7.8
		Informal	Upper	25.7	9.2	18.5	2.0	2.5	40.5	1.6	0.5
		Informal	Lower	15.5	3.8	22.9	5.4	4.5	41.2	6.8	4.3
	Self-employed	Formal		1.1	1.7	6.2	14.9	8.0	64.2	4.0	1.3
		Informal	Upper	2.2	1.3	8.2	8.0	24.2	52.4	3.8	2.9
		Informal	Lower	0.8	0.8	6.5	2.8	2.6	83.5	3.1	34.9
	TOTAL			11.9	2.6	10.5	5.2	6.4	59.7	3.7	51.7

b) South Africa

WAVE t = 0	Wage employed	Formal		78.9	6.7	5.5	2.1	1.0	0.7	5.1	44.7
		Informal	Upper	42.0	21.0	12.4	5.0	0.9	2.7	16.1	1.9
		Informal	Lower	22.0	10.9	39.8	3.9	3.2	3.9	16.2	8.5
	Self-employed	Formal		10.8	8.0	4.2	42.0	11.0	8.5	15.5	1.7
		Informal	Upper	9.9	9.0	15.8	13.1	19.1	14.3	18.8	1.0
		Informal	Lower	10.0	4.2	11.4	4.7	16.7	21.2	31.9	0.8
	TOTAL			56.9	8.9	13.4	4.7	3.1	3.0	10.1	58.6

c) Tanzania

WAVE t = 0	Wage employed	Formal		71.9	4.0	8.8	1.4	0.9	12.7	0.4	8.4
		Informal	Upper	40.5	5.1	29.2	5.7	2.5	15.9	1.1	0.2
		Informal	Lower	11.1	0.7	46.7	2.2	2.6	35.9	0.8	13.4
	Self-employed	Formal		1.6	0.0	4.1	25.8	14.8	53.6	0.0	2.3
		Informal	Upper	3.8	0.0	18.5	12.9	19.6	45.2	0.0	0.8
		Informal	Lower	3.8	1.0	9.9	5.4	2.7	74.8	2.5	32.5
	TOTAL			16.5	1.3	20.4	6.4	4.5	49.6	1.3	57.5

d) Uganda

WAVE t = 0	Wage employed	Formal		57.7	26.8	8.1	5.2	0.0	2.2	0.0	6.8
		Informal	Upper	17.8	43.1	12.6	5.1	5.5	16.0	0.0	4.7
		Informal	Lower	3.2	4.2	46.1	1.8	2.9	41.4	0.5	12.0
	Self-employed	Formal		2.6	0.0	10.1	19.8	14.3	53.3	0.0	0.6
		Informal	Upper	0.0	3.7	4.0	11.2	32.1	49.1	0.0	1.8
		Informal	Lower	1.2	0.5	6.3	2.3	3.8	85.4	0.5	36.4
	TOTAL			10.2	9.1	16.7	3.9	5.4	54.3	0.3	62.3

Average worker characteristics by work status

			Ghana	South Africa	Tanzania	Uganda
a) Average age (years)

Wage employed	Formal		43.5 (0.53)	37.5 (0.16)	40.5 (0.52)	36.1 (0.71)
	Informal	Upper	36.4 (0.82)	35.6 (0.37)	33.4 (1.00)	34.7 (0.84)
	Informal	Lower	38.4 (0.46)	35.4 (0.25)	30.3 (0.35)	30.5 (0.53)

Self-employed	Formal		41.5 (0.64)	41.3 (0.72)	37.5 (0.54)	34.8 (1.29)
	Informal	Upper	40.3 (0.53)	40.2 (0.54)	34.7 (0.83)	38.8 (0.95)
	Informal	Lower	40.8 (0.29)	38.6 (0.69)	31.0 (0.33)	34.8 (0.47)

TOTAL			40.5 (0.19)	37.2 (0.12)	32.7 (0.20)	34.1 (0.29)

b) Share of female workers (%)

Wage employed	Formal		33.7 (2.41)	41.5 (0.75)	32.5 (2.15)	41.3 (3.77)
	Informal	Upper	30.0 (3.55)	57.0 (1.65)	35.5 (4.33)	34.3 (3.80)
	Informal	Lower	33.8 (1.91)	44.3 (1.09)	34.0 (1.55)	26.8 (2.12)

Self-employed	Formal		47.9 (3.24)	45.8 (3.00)	36.0 (2.83)	39.7 (6.60)
	Informal	Upper	50.0 (2.67)	40.3 (2.25)	25.4 (3.73)	29.4 (4.25)
	Informal	Lower	81.7 (1.08)	58.4 (2.96)	63.9 (1.31)	47.9 (1.85)

TOTAL			56.8 (0.90)	44.2 (0.55)	46.7 (0.87)	38.9 (1.19)

c) Share of workers with secondary or tertiary education (%)

Wage employed	Formal		52.2 (3.02)	63.7 (0.74)	36.4 (2.29)	60.1 (3.88)
	Informal	Upper	37.8 (4.04)	55.5 (1.66)	39.9 (4.76)	59.7 (4.09)
	Informal	Lower	19.1 (1.76)	28.0 (0.98)	1.2 (0.36)	11.8 (1.66)

Self-employed	Formal		18.6 (2.80)	69.3 (2.78)	2.4 (0.91)	42.9 (6.74)
	Informal	Upper	10.0 (1.82)	28.6 (2.07)	3.3 (1.56)	37.3 (4.59)
	Informal	Lower	8.3 (0.95)	33.0 (2.82)	1.7 (0.38)	12.2 (1.29)

TOTAL			19.0 (0.83)	52.5 (0.55)	7.1 (0.47)	25.8 (1.13)

Change in distribution of workers by work status, balanced panel

			Ghana	South Africa	Tanzania	Uganda
a) Change (ppts) in proportion of employment by work status

Wage employed	Formal		1.7	−0.4	5.0	−2.7
	Informal	Upper	−2.5	1.6	−2.4	0.0
	Informal	Lower	−3.8	−3.3	−0.4	0.7

Self-employed	Formal		0.8	2.0	−2.8	1.3
	Informal	Upper	−1.5	−0.5	0.7	0.5
	Informal	Lower	5.3	0.6	−0.1	0.3

b) Change (ppts) in proportion of formal and informal employment

Formal			2.5	1.5	2.3	−1.5
Informal	Upper		−4.0	1.1	−1.7	0.5
Informal	Lower		1.5	−2.6	−0.5	1.0

c) Change (ppts) in proportion of self-employment

Self-employed			4.6	2.1	−2.2	2.1

Excludability of instruments from main employment dynamics equation

	Head of household	Sample member in the previous wave
F-statistic (p-value)	0.1800	0.9647

(Non-farm) employment and panel retention rates (%)

	Ghana		South Africa		Tanzania		Uganda

	Employed (non-farm)	Panel retention	Employed (non-farm)	Panel retention	Employed (non-farm)	Panel retention	Employed (non-farm)	Panel retention
Percentage share	51.7	70.8	78.1	75.9	33.2	69.1	34.0	71.9

Probability of employment (non-farm) in the baseline and panel retention

Variables	Ghana		South Africa		Tanzania		Uganda

	(1)	(2)	(1)	(2)	(1)	(2)	(1)	(2)

	Employed (non-farm)	Panel retention	Employed (non-farm)	Panel retention	Employed (non-farm)	Panel retention	Employed (non-farm)	Panel retention
Level of education (base: no schooling)
Primary	0.164^* (0.086)	−0.044 (0.080)	−0.040 (0.025)	0.013 (0.024)	0.091^*** (0.013)	0.014 (0.013)	−0.052^** (0.022)	0.004 (0.020)
Post-primary	0.216^** (0.085)	−0.034 (0.079)	−0.047^* (0.024)	0.013 (0.023)	0.332^*** (0.019)	0.014 (0.018)	0.108^*** (0.029)	−0.033 (0.026)
Secondary	0.328^*** (0.088)	−0.044 (0.082)	0.001 (0.024)	0.010 (0.024)	0.602^*** (0.038)	0.127^*** (0.032)	0.089^** (0.035)	−0.030 (0.031)
Post-secondary	0.506^*** (0.093)	−0.018 (0.090)	0.069^*** (0.025)	−0.013 (0.025)	0.556^*** (0.045)	0.024 (0.045)	0.356^*** (0.040)	−0.041 (0.037)
Tertiary	0.521^*** (0.091)	−0.081 (0.089)	0.160^*** (0.028)	−0.022 (0.032)	0.593^*** (0.063)	0.145^*** (0.040)	0.124^** (0.063)	−0.111^* (0.059)
Age	0.033^*** (0.004)	0.052^*** (0.003)	0.026^*** (0.002)	0.010^*** (0.002)	0.004^* (0.002)	0.031^*** (0.002)	0.010^*** (0.003)	0.027^*** (0.003)
Age squared (×0.01)	−0.042^*** (0.005)	−0.064^*** (0.004)	−0.024^*** (0.003)	−0.013^*** (0.003)	−0.010^*** (0.003)	−0.039^*** (0.003)	−0.016^*** (0.004)	−0.030^*** (0.004)
Female	0.189^*** (0.017)	−0.015 (0.014)	−0.089^*** (0.008)	0.061^*** (0.008)	−0.001 (0.011)	−0.074^*** (0.010)	−0.115^*** (0.015)	0.019 (0.013)
Urban	0.264^*** (0.012)	−0.032^** (0.015)	0.113^*** (0.008)	−0.011 (0.008)	0.375^*** (0.007)	−0.092^*** (0.011)	0.340^*** (0.015)	−0.050^*** (0.016)
Head of household	0.268^*** (0.018)		0.106^*** (0.008)		0.108^*** (0.012)		0.140^*** (0.017)
Sample member in the previous wave	n.a.n.a.		0.234^*** (0.008)		0.044^*** (0.012)		0.073^*** (0.016)
Wald test of rho = 0	15.216		10.086		17.313		9.811
F-statistic (p-value)	0.000		0.002		0.000		0.002
Observations	6,718		21,498		7,870		4,315

Informal work in sub-Saharan Africa: Dead end or stepping-stone?

Figures & Tables

Figure 1

Figure 2

Figure C1

Figure C2

Figure C3

Figure C4

Transition matrices across work status groups

Distribution of workers by work status (%), extended definition

Basic socioeconomic, labor market and institutional indicators, 2010–2017

Distribution of workers by work status (%)

Change in log labor earnings

Data sources

Employment dynamics, including inactivity/unemployment as an additional destination state

Employment transitions

Employment dynamics, using ordered logistic regression

Transition matrices across work status groups, including additional destination states (family farms under lower-tier informal self-employment and unemployment)

Average worker characteristics by work status

Change in distribution of workers by work status, balanced panel

Excludability of instruments from main employment dynamics equation

(Non-farm) employment and panel retention rates (%)

Probability of employment (non-farm) in the baseline and panel retention

Paradigm

My account