Legal Structures and the Informal Economy in Sub-Saharan Africa
Mac Dougall, Sarah
Building on previously existing literature relating to the impact of legal structure on a country’s economy, this paper looks at how the distinction of common versus civil law tradition impacts informal economies of Sub-Saharan African (SSA) countries. Specifically, it considers how legal tradition correlates to the (1) overall size and (2) size as a proportion of certain sectors of SSA countries’ economies. Using both direct and modeling data on informality and Ordinary Least Squares (OLS), multivariate, and truncated regression analysis, this paper finds significant and positive correlation between civil law and agricultural informality (significant and negative for common law), fitting with the model’s predictions based on historical colonial legacies. The relationship between nonagricultural informality and civil law is found to be less significant, but still positive (negative for common law), while the relationship between legal tradition and the size of SSA countries’ informal economies overall seems to be negligible and insignificant.
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