IS SOCIAL CAPITAL IMPORTANT IN FORMAL-INFORMAL SECTOR LINKAGES?
Vol. Volume 22, Number 2 June/2017
Is social capital important in formal-informal sector linkages? Previous research focused on the role of the productive capacities of the enterprises in the informal sector as determining factors. This paper aims to uncover, at least in part, whether or not social capital is important in facilitating the linkages between enterprises in the formal, and the informal sector. As a novelty, having linkages with the formal sector is treated as a rare event. Consequently, the analysis involves flexible binary generalized extreme value models using data from the World Bank Informal sector survey. The scope is thirteen countries from sub-Saharan Africa. The results are indicative that social capital has significant positive real effects on the likelihood of linkages. If one sees the informal sector as a source of jobs and as a stepping-stone to the formal sector, there is a case for the recognition of the role of informal social networks in the design of entrepreneurial policy.
Informal sector; social capital; rare event