Page 63 - Azerbaijan State University of Economics

Abderrahmane Benouaret: Towards Regulating Freelance Work and the Informal
Economy in Algeria: Will the Self-Employed Contractor Law Suffice?

Regarding the causes of the informal economy, researchers unanimously agree on their
multiplicity and diversity. However, the economic context in any country is considered
the main determinant of the size of this economy, followed by legal frameworks, political
stability, and other economic factors, such as income inequality, deprivation, poverty, tax
burdens, and social welfare systems, which are the primary causes of the informal
economy (Luque, 2022). Some scholars, such as (Petrescu, 2016), have gone further,
suggesting that trade and financial sanctions imposed on certain countries significantly
contribute to the growth of the informal economy in those nations.

Initially, the informal economy was primarily associated with the economies of
emerging and developing countries. Many studies focused on estimating its size in
these countries using various estimation methods, including direct methods, which
rely on surveys and voluntary responses, or other compliance techniques. There are
also indirect methods that infer the magnitude of the informal economy through
measurable indicators. Currently, five key indicators are employed to quantify the
informal economy: the disparity in revenue and consumption, the divergence between
the official and real labor force, the transactions approach, the currency demand
approach, and the physical input model (based on electricity consumption). Another
approach is the MIMIC model stands for numerous indications and multiple causes.
Which considers different elements contributing to the existence and growth of the
hidden economy (Schneider & Buehn, 2016).

A study by (Ohnsorge & Shu, 2022) in a report for World Bank, Group indicated that
the informal economy represented 33% of the gross domestic product (GDP) of
emerging and developing countries for the period 2010–2018. Similarly, (Schneider,
2022), in a study covering 157 developing and emerging countries, found that the
average informal economy in these countries amounted to 30.9% of GDP for the
period 1991–2017. In Latin America and Sub-Saharan African countries, the
percentage ranged between 38% and 39% during the same period. Another study by
(Matsongoni & Mutambara, 2018) estimated the contribution of informal small and
medium enterprises (SMEs) in many countries across Africa to be around 50% of
GDP, while the informal economy in Asia represented 28% of GDP (Nguyen, Vo,
Tran, & Tran, 2022). In developed countries, the informal economy accounts for only
14% to 18% of GDP (Ohnsorge & Shu, 2022). In Poland, for instance, as a European
country, it constitutes 12% of GDP (Cichocki & Torój, 2023).

In Algeria, several studies have addressed the matter of the informal economy in
Arabic, French, and English. As of the writing of this research paper, 23 scientific
articles in English on some aspects of the informal economy in Algeria are indexed
on the Algerian Scientific Journals Platform (ASJP).

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