Quantitative linkages between the formal and informal sectors in the South African economy

Abstract

The need to quantify the impact of the informal sector has thus far not received  adequate attention so as to allow policy makers, informal sector enterprises and  the formal sector to determine which specific areas of the economy should be  further analysed for the purposes of ascertaining the linkages that exist between  the formal and informal sectors. In this study, an attempt is made to quantify the  linkages between the formal and informal sector, using the 1993 South African  Input–Output Table. By disaggregating the formal and informal sectors, it has  been possible to determine specific coefficients for both sectors. The “importexport”  concept has been used to show how these sectors are interrelated. The  multiplier analysis confirms that certain sectors of the informal sector may be  more responsive to changes in the final demand than the formal sector.