Does Informality Slow Down the Attainment of Sustainable Development? New Empirical Evidence From Sub-Saharan African Countries

How does a high share of informality affect the achievement of sustainable development? This is attributed to the fact that activities in the informal economy are often excluded from a country’s national accounting system because they can be difficult to measure. This chapter examines the contending debate about the proliferation of informality using the novel measurement of the sustainable development index compiled by Sachs et al. (2024) , an index measuring a country’s overall progress towards achieving all the 17 SDGs. It highlights how informality represents the developmental challenges of poverty, marginalized population, and unemployment. It also provides insights that can assist policymakers in understanding and developing comprehensive policies aimed at minimizing the growth of informality, as its expansion affects domestic tax collection, unfair competition, and decreased productivity. The findings underscore the critical necessity for policymakers to prioritize formalization policies and other initiatives meant to ease the transition to formality must therefore be tailored to the specific circumstances that different countries, economic structure types or workers, and high informality sectors. JEL classification : O17, E26, Q01