THE MEDIATION EFFECT OF INFORMAL SECTOR GROWTH ON THE RELATIONSHIP BETWEEN POVERTY AND INEQUALITY IN SUB-SAHARAN AFRICA COUNTRIES

Résumé En

The purpose of this research was to examine the mediating effect of informal sector growth on the inequality-poverty nexus. The focus was on 35 countries in sub-Saharan Africa (SSA) for the period 1990 to 2018 and the empirical evidence is based on two steps system Generalized Methods of Moments (SGMM) estimate. Poverty gap, consumption gini coefficient, and multiple indicators multiple causes' model-based (MIMIC) estimates of informal output (% of official GDP) were used to captured poverty, inequality, and informal sector output respectively. Our findings revealed that although a growing informal sector increases inequality and poverty, this same poverty falls as a result of the interaction between informal sector output and inequality. The implication is that a growing informal sector can help mediate the effect of inequality on poverty through its confounding effect on inequality. A main policy recommendation is that SSA policy marker should encourage formal activity that can help provide better job opportunity since informal sector growth increases both inequality and poverty in the society and only help in poverty reduction through it mediating effect