Fostering domestic resources mobilization in sub-Saharan Africa: Linking natural resources and ICT infrastructure to the size of informal economy

This study investigates the effect of natural resources rents and information and communications technology (ICT) infrastructure on the size of the informal economy in Sub-Saharan African countries. It does so by using different measures of the informal economy, resources rents, and ICT and employs pooled OLS and IV-2SLS estimators to estimate two-way fixed effects models. The study covers 42 countries and spans the period 1991-2015. The results reveal that while natural resources rents increase the size of the informal economy, ICT has a mixed direct effect on the informal economy. More interestingly, the results reveal that resources rents reduce the size of the informal economy in countries with higher accessibility to ICT. African states need to ensure transparent management of natural resources revenues but also use these revenues to increase public spending to support growth and diversification to create more jobs in the formal sector. They should also invest more in ICT infrastructure to help mobilize domestic resources.

Automated summary

This study investigates the impact of natural resources rents and ICT infrastructure on the size of the informal economy in Sub-Saharan African countries. The findings suggest that natural resources rents increase the size of the informal economy, whereas the effect of ICT infrastructure is mixed. Interestingly, the study also reveals that resources rents reduce the size of the informal economy in countries with higher accessibility to ICT. African states need to manage natural resources revenues transparently and utilize them for public spending to support growth and job creation in the formal sector. Additionally, investing in ICT infrastructure can help mobilize domestic resources.