rafmacalaba/data-use-mentions-extended huggingface dataset:
Policy Research Working Paper 9515

# **Abstract**

The informal sector is an important source of livelihoods and jobs for a vast majority of people in developing countries. However, there is concern that the informal sector may undermine job creation in the formal sector. According to the “parasite” view of informality, informal firms can compete against formal firms, and often “unfairly” so as they do not have to comply with costly regulations and pay taxes. This “unfair” advantage makes it difficult for formal firms to compete against informal firms, implying a significant loss of formal sector jobs. Using firm-level survey data for manufacturing small and medium-size enterprises in 109 mostly developing countries, this study estimates the impact of competition from informal firms on the growth rate of employment among formal sector small and medium-size enterprises. The results show that the growth rate of employment declines significantly as competition from informal firms rises. According to the baseline specification, for each one standard deviation increase in informal competition, the employment growth rate declines by 1 percentage point. Consistent with the parasite view of informality, the negative impact on job growth is much larger when the business environment is less conducive to operating formally versus informally due to factors such high corruption, weak rule of law, more burdensome regulations, and high profit tax rate. Several checks are provided against endogeneity concerns.

This paper is a product of the Global Indicators Group, Development Economics. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/prwp. The author may be contacted at mamin@worldbank.org.

_The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers
vulnerability of native workers in the same geographic areas. Our empirical analysis is motivated by a general equilibrium model of comparative advantages in task performance between immigrant and native workers (Peri and Sparber, 2009). In the model, native workers reallocate to other occupations in response to an influx of immigrant workers. We use a Bartik-type of instrument to account for the endogeneity of migrants’ location choices that respond to local job opportunities. We focus on destination countries in Western Europe, including the 15 countries that were the initial members of the European Union (prior to the 2004 enlargement), Norway, and Switzerland. This region is the destination for an estimated 60 million of some 272 million immigrants worldwide. The analysis is based on a harmonized labor force dataset that contains detailed information on personal characteristics (such as age, education, occupation and sector) of native workers and labor migrants in hundreds of local labor markets in subregions within European countries.<sup>2</sup> We find that native-born workers in European subregions that have a higher share of immigrants are significantly less likely to be exposed to various dimensions of occupational vulnerability associated with COVID-19. We show that the relationship is causal, and results get stronger once the endogeneity of immigrants’ location choices is taken into account. We also find heterogeneous effects depending on characteristics of native workers. The effects of immigration on job safety are stronger for highly (tertiary) educated native workers, who benefit from the presence of both high-skilled and low-skilled migrants. By contrast, the effects are smaller and statistically insignificant for less (non-tertiary) educated native workers. We also assess whether these compositional effects on employment of certain types of native workers are accompanied by effects on their total employment and wages. We find no evidence of wage or employment impacts among native workers, suggesting that the increase in job safety among native workers is driven by their reallocation from vulnerable jobs to safer jobs. In short, we show that immigration to Western Europe reduced the economic exposure of native-born workers to
increasing adolescent girls’ human development outcomes and likelihood to engage in income-generating activities (World Bank 2013).

# **_Identify and develop marketable skills that increase opportunities for service sector employment and for entrepreneurial activities_**

There is a need to identify and develop marketable skills, especially for women and youth who migrate to cities from rural areas, since many of them only have agricultural skills. As long as Sudan continues to experience droughts and desertification and have large numbers of IDPs, people will continue to migrate out of those circumstances (primarily, though not exclusively, from the Darfur region) to urban areas that are believed to offer a diversity of employment opportunities. Despite the large number of working-age youth in Sudan, however, many are unemployed, especially in the country’s urban areas. Few workingage Sudanese attend vocational training programs (3 percent). Of those who do, about a third are women, and about a third are youth. The KIIs with employers and employees revealed an education and skills mismatch in the labor market. Vocational training programs, coupled with basic business programs, should be established and/or strengthened based on the specific demands of the labor market in the areas in which they are being offered, as well as the interests of the youth and the women who live there, with access to funding available to encourage an entrepreneurial spirit. Additionally, vocational training programs tailored to specific geographic regions should not only help people obtain the skills necessary to become employed in needed vocations but also emphasize job search skills, so that those who do not have access to the internet or to _wasta_ can still succeed.<sup>32</sup> In a related vein, research has shown that, to increase women’s economic activity, rather than focusing on general managerial training, programs are more effective in numerous contexts in Africa when addressing socio-emotional skills and gender-specific content (Campos et al. 2019).

The service sector employs 46 percent of the labor force and is a key sector for
# 1) Background and Summary

The agricultural sector concentrates large fractions of the labor force and economic output in many lowincome countries. In Sub-Saharan Africa, the world’s poorest region, the agricultural sector accounts for about 50% of the labor force (World Bank, 2021). The agricultural sector, and consequently domestic food production, is dominated by smallholder farmers in the region. Many of the world’s extreme poor rely on the agricultural sector for their income and food security. The importance of the agricultural sector for poverty alleviation, food security, structural transformation, and economic development more broadly has been widely recognized (Dercon and Gollin, 2014; Gollin, 2010). As a result, studying the sector has been of considerable interest to development research, policy interventions, and investment decisions (Adamopoulos and Restuccia, 2020; Gollin et al., 2014, 2013; Gollin and Udry, 2021; Restuccia and Rogerson, 2013).

However, the data landscape was long characterized by a persistent lack of high-quality data, requisite to informing research and policy interventions (Carletto, 2021). The World Bank’s Living Standards Measurement Study – Integrated Surveys on Agriculture (LSMS-ISA) program was designed to address this gap. The LSMS-ISA program consists of nationally and sub-nationally representative, longitudinal and multi-topic household surveys, with a distinct focus on agricultural production. Starting in 2008, the surveys were implemented by National Statistical Offices (NSOs) with the support of the World Bank’s Living Standards Measurement Study (LSMS) team. LSMS-ISA data is widely considered the premier source of survey micro-data on agricultural production and productivity in Sub-Saharan Africa – and its relationship to livelihoods, household income, poverty, and food security (Wollburg et al., 2024a, 2024b).

In this paper, we present a harmonized panel of LSMS-ISA surveys from seven Sub-Saharan African countries, namely Ethiopia, Malawi, Mali, Niger, Nigeria, Tanzania and Uganda. This harmonized panel dataset (hereafter HP) covers over 200,000 agricultural
Most of the PE/VC funds investing in Ghana tend to be sector agnostic and employ venture or growth investment strategies, using both equity and quasi equity financing; however, there is a small subset of thematic funds focused on impact, health, agribusiness, real estate or infrastructure which also invest in Ghana. According to EMPEA data, Ghanaian banks and financial services outfits have been significant recipients of PE/VC fund investment – totaling roughly US$115 million since 2008. There has also been significant PE investment towards oil and gas exploration and production in Ghana. In 2008, globally renowned private equity shops Warburg Pincus and Blackstone Capital Partners invested US$500 million in Kosmos Energy for its development activities in West Africa, including the Jubilee Field offshore Ghana. Real estate investments in Ghana by PE funds have also featured prominently in EMPEA data, amounting to US$45 million since 2008, including the Abraaj Group’s US$20 million investment in Regimanuel Gray Ltd., a real estate developer, in 2008.<sup>73</sup> Thematic funds investing in Ghana include the following four broad categories:

- a) **Impact investors** such as Acumen, I&P, and Injaro.<sup>74</sup> Acumen’s West Africa office opened in 2011 and they have invested in four deals in Ghana totaling roughly US$7 million.<sup>75</sup>

- b) **Health investors** such as Abraaj Capital’s US$105 million Africa Health Fund, which invested in C&J Medicare Hospital in Ghana.

- c) **Agricultural/agribusiness-focused funds** such as the US$49 million Injaro Capital Holdings and US$36 million AAF SME (although the latter has not yet invested in Ghana).

- d) **Real estate funds** such as US$278 million Actis Africa Real Estate II; and US$154 million Actis Africa Real Estate (2006) which
,000<br>5<br>100,000<br>- 0<br>2,001 2,004 2,007 2009 (Est) 2001 2004 2007 2009 (Est)<br>Total International Intercontinental Domestic<br>Total International Intercontinental Domestic<br>City Pairs<br>Number of seats<br><!-- End of picture text --> _Source_ : Bofinger 2008. Derived from AICD national database downloadable from http://www.infrastructureafrica.org/aicd/tools/data. _Note_ : As reported to international reservation systems. No domestic services are represented in the statistics. The capacities shown in panel 10.a reflect the fleet of Air France, Royal Air Maroc, and a dozen other carriers.

Carriers in Benin are using modernized air fleets. The main foreign companies operating in Benin have modernized 88.5 percent their fleets and, as of today, the country is served by a comparably new fleet in the region (table 7).

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The paper contributes to the literature in three ways: first, it is the first study that covers a large number of developing as well as developed countries to analyze the interlinkages between UB and ALMP and labor market outcomes; second, it utilizes rich, novel data from the World Bank covering 191 economies in 2019 and 2020; third, it is the first study assessing the association of both UB and ALMP with employment, unemployment and productivity using macro data and distinguishing among different income groups. There is no previous study analyzing the relationship between ALMP and productivity, and there are only few studies assessing the association of UB with productivity, including Solter (2017) and Acemoglu and Shimer (2000). All other studies focus on the interlinkages between UB or ALMP with employment, unemployment, matching quality, or earnings, and the overwhelming majority of these studies focus on developed economies.

To the best of our knowledge, Pignatti and Van Belle (2018) is the only other study that uses data from both developed and developing economies—covering 36 developed, 64 emerging and 21 developing economies— to analyze the impact of ALMP and UB on unemployment and employment.<sup>3</sup> The authors find that in developing countries ALMP spending decreases unemployment and increases employment, while the spending on passive labor market policies (PLMP), like UB, lacks a significant impact on either. They also point out that ALMP and PLMP in developing countries are substitutes, rather than complements, in promoting employment and reducing unemployment. In contrast, in developed economies, both ALMP and PLMP increase unemployment and decrease employment. However, there is a complementary relationship between them, in that when ALMP spending is sufficiently high, higher PLMP spending reduces unemployment and boosts employment.

Different from the work of Pignatti and Van Belle (2018), this study covers a larger number of developing and developed countries. In addition to employment and unemployment, it also investigates the linkages of UB and ALMP with productivity growth and incorporates an interaction term
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# **IV.C How Countries Choose Regulations**

In BCL (2006), we analyze why countries choose the regulations that they do. Do countries behave according to a Coasian theory of bank regulation, picking that structure which is efficient for their economy? Do they make mistakes because of bad information? Or do countries choose seemingly suboptimal regulatory systems because the people who control government are maximizing their own welfare, rather than selecting the system that would most benefit their societies? In the light of this debate, we examined the relationship between key regulatory variables – such as private monitoring, official supervision, entry requirements, activity restrictions, and government owned banks – and measures of the nature of political systems. In this paper we replicate that earlier work, but due to data availability issues, just with the indicator of Voice and Accountability, which attempts to measure the extent to which average citizens have a voice in the political process and can hold politicians accountable. As before we use the same instruments for Voice and Accountability, namely legal origin, and have the same control variables.

The results are shown in Tables 5 and 6. In both Survey I and Survey IV, more open political systems (as measured by voice and accountability) tend to have greater limitations on supervisory powers (as measured by lower value of the Official Supervisory Power Index) and fewer restrictions on what banks can do (as measured by the Activity Restrictions Index). We also find that greater political voice and accountability is positively associated with private monitoring, though this relationship is only statistically significant in the Survey IV regressions.
ANGOLA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE to 22 percent over the same year (table 13), particularly in urban areas. Use of traditional latrines also increased from 16 to 21 percent between 2001 and 2007, mostly in rural areas, where 2.2 percent of the population has been gaining access to this form of sanitation each year (figure 16b).

**Figure 16. Angola has made important progress in the sanitation sector but not in the water supply sector**

Population gaining access per year, 1998–2006 <!-- Start of picture text --> a. Water<br><!-- End of picture text --> <!-- Start of picture text --> b. Sanitation<br><!-- End of picture text --> <!-- Start of picture text --> 7 7<br>6 6<br>5 5<br>4.7 4.7<br>4 4<br>3 2.9 3 2.9<br>2 2<br>1 0.9 1 0.9<br>0 0<br>-1 National Urban Rural -1 National Urban Rural<br>-2 -2<br>-3 -3<br>-4 -4<br>Piped Water Standposts Septic tanks Improved Latrines<br>Wells/Boreholes Surface Water Traditional Latrines Open Defecation<br>Annualized Growth Annualized Growth<br>Population gaining access per year (%) Population gaining access per year (%)<br><!-- End of picture text --> _Source:_ WHO Joint Monitoring Program 2010, from the 2001 Multiple Indicator Survey and 2007 Malaria Indicator Survey.

# **Challenges**

Angola still has the highest rate of diarrheal disease in the world, with 114 years of life lost to diarrheal diseases for every 1,000 Angolans. In 2006 a cholera epidemic
determined by the tax administration without any form being filled by the business, this “offer” was not technically implemented. The advisors also left their contact information in case the _entreprenant_ had any complaints about future tax payments and inspections, and offered mediation services in case of a dispute between the firm and the tax administration.

Appendix 1 provides more detail on how these three packages were implemented.

# **3.2 Sample selection and study population’s characteristics**

A listing survey was conducted in Benin’s largest city of Cotonou in March and April 2014. This survey was designed in order to obtain a representative sample of all businesses operating in Cotonou, including Dantokpa market.<sup>6</sup> All businesses with fixed location, except international and nationwide companies and liberal professions, were targeted. Overall, 19,246 businesses were listed, of which a sample of 7,945 were surveyed. We then dropped businesses which were already formal, and which had very high or very low profits and sales to arrive at a sample of 3,596 for the study. Appendix 2 provides details on the sampling protocols and this selection process.

Table 1 provides descriptive statistics for businesses selected in the sample, and compares them to the overall set of informal businesses and to formal businesses. Businesses selected for the study have very similar characteristics to the whole population of informal businesses surveyed, and the overall study shows good external validity for the whole city of Cotonou. Formal businesses had on average 3.2 employees and monthly profits of around CFAF 210,000 (USD 352), while informal businesses had 1.1 employees and a monthly profit of CFAF 46,000 (USD 77). About 60% of businesses were connected to the electricity network, 55% of businesses were involved in trade activities, 26% worked in services, and 16% were craftsmen. 63% of businesses sampled for the study were owned by women. This reflects the high share of female owners in
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15. Three connectivity variables are constructed using spatial software based on road user costs and maritime transport costs: The first is transport costs to bring goods to Moroni, denoted by _COSTMORONI_ . This measures the accessibility to the primary market. The second variable is transport costs to bring goods to a large city with a population of 7,500 or more ( _COSTCITY_ ). Major towns in each island are taken into account.<sup>3</sup> This is expected to represent the market accessibility at a more local level within each island.

16. Finally, the Market Access Index ( _MAI_ ) is computed as an integral measure of all kinds of market accessibility. Formally, it is often defined by the average market size inversely weighted by transport difficulties. The idea basically follows Tobler’s first law of geography: “everything is related to everything else, but near things are more related than distant things (Tobler 1970).” where _Ym_ represents the size of market at _m_ , which is measured by the population that does not engage in agricultural production.<sup>4</sup> _dim_ measures transportation costs between location _i_ and destination _m_ . The index is normalized to zero to one. It is clear that Moheli is particularly disconnected from the rest of the country, while Grande Comore, especially around Moroni, has relatively good market accessibility ( **Figure 11** ). Not surprisingly, poverty is highly correlated with the MAI: The poor tend to be less connected to the markets ( **Figure 12** ).

> 3 Twenty-one cities and towns were identified among a total of 302 populated areas: Adda Daoueni, Barakani, Bazimini, Dindri, Domoni, Fomboni, Iconi, Jimlime, Koni Djodjo, Mbeni, Mirontsi, Moroni, Moya, Mremani, Mutsamudu, Ngadzale, Ongodjou, Ouani, Ounkazi, Sima and Tsembehou.

> 4 It is estimated by the population multiplied by the share of non-agricultural households, which is calculated by subregion
suggesting that these banks relied more on foreign exchange business pre-privatization than private commercial banks, while reducing their reliance post-privatization. The coefficients for _Privatized_ and _Time since Privatization_ , which are negative and jointly significant, indicate that within a short period privatized banks shifted to foreign exchange shares of income similar to those for other private commercial banks.<sup>22</sup>

# **7. Conclusions**

Using a unique database on Nigerian banks, this paper has shown some positive performance effects of privatization, even in an economy with weak institutions and a macroeconomic and regulatory environment that was inhospitable to financial intermediation. While government owned banks performed significantly worse in terms of profitability and loan portfolio quality than privately owned banks, privatization helped close this gap, while other government-owned banks, even with only a minority ownership stake of the government, continued with the significantly poorer performance. Our findings, however, also show the boundaries of privatization. We do not find any performance improvement beyond other private banks in the Nigerian banking system. The underlying perverse incentive structure that was given by adverse macroeconomic conditions and regulatory 22 Foreign exchange speculation, however, does not necessarily have to show up only in foreign exchange revenue, since the corresponding profits can be obtained in the money market, as examples from other developing countries have shown. While we cannot say for sure that privatized banks were reducing their foreign exchange operations, we can say that, for them _not_ to have done so would have required a switch from pure foreign exchange speculation to speculation through the money market. We know of no anecdotal evidence supporting that view.

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Figure 3. Mexico displays high levels of spatial inequality across states _Marginalization Index by state, 2020_ <!-- Start of picture text -->
1.00<br>0.90 0.860.85 0.83<br>0.80<br>0.80 0.73<br>0.69<br>0.70<br>0.60<br>0.60<br>0.50<br>0.490.440.40<br>0.40<br>0.30<br>0.20<br>0.10<br>0.00<br>NL CDMX COA AGC JAL COL BCS SON BC TAM QRO MEX QROO SIN CHH TLA MOR ZAC GTO SLP DGO TAB MICH HGO CAM PUE NAY YUC VER OAX CHS GRO<br><!-- End of picture text -->

Source: Own estimates using CONAPO estimates based on Population and Housing Census 2020. Abbreviation codes in Annex 1

# 3. Literature review

**The literature analyzing migration determinants and their economic effects is quite extensive and can be split into two main research areas: macro and micro approaches.** On the one hand, the migration literature studies how macroeconomic variables determine the intensity and the direction of migration flows, using gravity-type models to estimate the effects of demographic and economic push and pull factors at the aggregated level.<sup>4</sup> On the other hand, the individual migration decision is explored by another research stream that determines the propensity to migrate driven by individual characteristics of the migration unit (household or individual). While most of the literature focuses on international migration,<sup>5</sup> less is known about the factors that determine internal migration behavior and the implications for an individual’s wellbeing.

## **Unlike international migration, other factors may play a more relevant role in determining migration**

**decisions