Identification of the Productivity Gap Between Formal and Informal Sectors in Three Western African Countries

This paper investigates the output gap between the formal and informal sectors in three Western African countries: Benin, Mali and Senegal. Using original matched employer-employee databases, we find evidence of low physical and human capital returns in these countries when considering the informal sector. There is also evidence that these economies are deeply cleaved between productive and non productive firms within the informal sector. Some informal sub-sectors are comparable to some formal ones. Estimating the production function, we find important differences between countries and across sectors: Malian formal sector is significantly more efficient than Beninese and Senegalese ones, while the Senegalese informal sector appears to be the most efficient one.