THE EFFECT OF THE INFORMAL ECONOMY ON POVERTY: The role of Information and Communication Technologies (ICT)

Abstract

This study investigates how access and usage of Information and Communication Technologies (ICT) could affect the relationship between the size of the informal economy and poverty in developing countries. This topic has yet to receive much scholarly attention apart from one previous study, who argued that the moderating effect of ICTs is through the mechanism of greater financial inclusion. This thesis expands upon this argumentation by arguing that ICT also could affect this relationship by allowing information and communication improvements. This in turn is argued to increase the productivity of the informal workers by allowing them to overcome some of the limitations of informal employment, thereby influencing the poverty levels associated. To empirically test these arguments, a cross-country analysis is performed in a sample of 67 developing countries in the year 2014, using a more substantial proxy for poverty in comparison to previous research. The analysis did not show a significant effect in contrast to the previously mentioned study. The null-findings of this thesis are argued to be due to limitations in data and methodology.