Estimating the size of the informal sector in Kenya

In Kenya, very little research has been carried out on the topic of the informal sector. This paper estimates the size of the Kenyan informal sector for the period 1970–2018. In light of our analysis of the stationary properties of the data, which suggests a mixture of I(0) and I(1) variables, this...

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Autores principales:	James Murunga, Moses Kinyanjui Muriithi, Nelson Were Wawire
Formato:	article
Lenguaje:	EN
Publicado:	Taylor & Francis Group 2021
Materias:	kenya informal sector autoregressive distributed lag currency tax ratio Finance HG1-9999 Economic theory. Demography HB1-3840
Acceso en línea:	https://doaj.org/article/a830a7305a9441d1aa8d8b92873cdb5e
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spelling	oai:doaj.org-article:a830a7305a9441d1aa8d8b92873cdb5e2021-11-26T11:19:50ZEstimating the size of the informal sector in Kenya2332-203910.1080/23322039.2021.2003000https://doaj.org/article/a830a7305a9441d1aa8d8b92873cdb5e2021-01-01T00:00:00Zhttp://dx.doi.org/10.1080/23322039.2021.2003000https://doaj.org/toc/2332-2039In Kenya, very little research has been carried out on the topic of the informal sector. This paper estimates the size of the Kenyan informal sector for the period 1970–2018. In light of our analysis of the stationary properties of the data, which suggests a mixture of I(0) and I(1) variables, this study specifies an Autoregressive Distributed Lag Model (ARDL), which is applied to variables that pose such attributes. In addition, the model is good for small sample size observation, a characteristic that is common among developing countries. Our estimates indicate that this sector is quite large and has grown over time to about 32% of the country’s GDP or nearly one-third of the size of the recorded GDP. These results are consistent with the stylized fact about the Kenyan economy, in particular the large number of individuals employed in small businesses and trading as well as the number of tax returns filed on an annual basis versus the stated level of employment. The finding of a significant informal sector also has implications for the conduct of fiscal policy. The sector should not be wound abruptly since it provides employment to many Kenyans. The fiscal policy should aim at reducing the tax burden so that the participants in the informal sector gradually formalize their businesses.James MurungaMoses Kinyanjui MuriithiNelson Were WawireTaylor & Francis Grouparticlekenyainformal sectorautoregressive distributed lagcurrencytax ratioFinanceHG1-9999Economic theory. DemographyHB1-3840ENCogent Economics & Finance, Vol 9, Iss 1 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	kenya informal sector autoregressive distributed lag currency tax ratio Finance HG1-9999 Economic theory. Demography HB1-3840
spellingShingle	kenya informal sector autoregressive distributed lag currency tax ratio Finance HG1-9999 Economic theory. Demography HB1-3840 James Murunga Moses Kinyanjui Muriithi Nelson Were Wawire Estimating the size of the informal sector in Kenya
description	In Kenya, very little research has been carried out on the topic of the informal sector. This paper estimates the size of the Kenyan informal sector for the period 1970–2018. In light of our analysis of the stationary properties of the data, which suggests a mixture of I(0) and I(1) variables, this study specifies an Autoregressive Distributed Lag Model (ARDL), which is applied to variables that pose such attributes. In addition, the model is good for small sample size observation, a characteristic that is common among developing countries. Our estimates indicate that this sector is quite large and has grown over time to about 32% of the country’s GDP or nearly one-third of the size of the recorded GDP. These results are consistent with the stylized fact about the Kenyan economy, in particular the large number of individuals employed in small businesses and trading as well as the number of tax returns filed on an annual basis versus the stated level of employment. The finding of a significant informal sector also has implications for the conduct of fiscal policy. The sector should not be wound abruptly since it provides employment to many Kenyans. The fiscal policy should aim at reducing the tax burden so that the participants in the informal sector gradually formalize their businesses.
format	article
author	James Murunga Moses Kinyanjui Muriithi Nelson Were Wawire
author_facet	James Murunga Moses Kinyanjui Muriithi Nelson Were Wawire
author_sort	James Murunga
title	Estimating the size of the informal sector in Kenya
title_short	Estimating the size of the informal sector in Kenya
title_full	Estimating the size of the informal sector in Kenya
title_fullStr	Estimating the size of the informal sector in Kenya
title_full_unstemmed	Estimating the size of the informal sector in Kenya
title_sort	estimating the size of the informal sector in kenya
publisher	Taylor & Francis Group
publishDate	2021
url	https://doaj.org/article/a830a7305a9441d1aa8d8b92873cdb5e
work_keys_str_mv	AT jamesmurunga estimatingthesizeoftheinformalsectorinkenya AT moseskinyanjuimuriithi estimatingthesizeoftheinformalsectorinkenya AT nelsonwerewawire estimatingthesizeoftheinformalsectorinkenya
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Estimating the size of the informal sector in Kenya

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