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Nature and Determinants of the Linkages between Informal and Formal Sector Enterprises in Nigeria

Nature and Determinants of the Linkages between Informal and Formal Sector Enterprises in Nigeria This paper provides a quantitative analysis of the nature of the informal sector's linkages with the formal sector in Nigeria. The informal sector has both backward and forward linkages with the formal sector. The backward linkages involve the flow of raw materials, equipment, finance and consumer goods from the formal sector to informal sector enterprises. Two types of forward linkages are identified. These are subcontracting agreements with large domestic companies, government agencies and foreign companies on the one hand, as well as the supply of consumer goods from informal sector enterprises to the formal sector on the other. The empirical analysis based on a logit regression model reveals that key variables accounting for the extent of backward linkages with the formal sector pertain to registration of the informal sector enterprise, level of investment, annual income of the entrepreneur, number of employees, entrepre‐neur's previous work experience and the education of employees. In the case of forward linkages with the formal sector, the most important variables are registration on the part of the informal sector enterprise, investment expended to date, annual income of the entrepreneur, level of profitability of the enterprise, vocational training and education of employees. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png African Development Review Wiley

Nature and Determinants of the Linkages between Informal and Formal Sector Enterprises in Nigeria

African Development Review , Volume 13 (1) – Jan 1, 2001

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References (14)

Publisher
Wiley
Copyright
Copyright © 2001 Wiley Subscription Services
ISSN
1017-6772
eISSN
1467-8268
DOI
10.1111/1467-8268.00033
Publisher site
See Article on Publisher Site

Abstract

This paper provides a quantitative analysis of the nature of the informal sector's linkages with the formal sector in Nigeria. The informal sector has both backward and forward linkages with the formal sector. The backward linkages involve the flow of raw materials, equipment, finance and consumer goods from the formal sector to informal sector enterprises. Two types of forward linkages are identified. These are subcontracting agreements with large domestic companies, government agencies and foreign companies on the one hand, as well as the supply of consumer goods from informal sector enterprises to the formal sector on the other. The empirical analysis based on a logit regression model reveals that key variables accounting for the extent of backward linkages with the formal sector pertain to registration of the informal sector enterprise, level of investment, annual income of the entrepreneur, number of employees, entrepre‐neur's previous work experience and the education of employees. In the case of forward linkages with the formal sector, the most important variables are registration on the part of the informal sector enterprise, investment expended to date, annual income of the entrepreneur, level of profitability of the enterprise, vocational training and education of employees.

Journal

African Development ReviewWiley

Published: Jan 1, 2001

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