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Leandro Medina, Mr. Andrew W Jonelis, and Mehmet Cangul
The multiple indicator-multiple cause (MIMIC) method is a well-established tool for measuring informal economic activity. However, it has been criticized because GDP is used both as a cause and indicator variable. To address this issue, this paper applies for the first time the light intensity approach (instead of GDP). It also uses the Predictive Mean Matching (PMM) method to estimate the size of the informal economy for Sub-Saharan African countries over 24 years. Results suggest that informal economy in Sub-Saharan Africa remains among the largest in the world, although this share has been very gradually declining. It also finds significant heterogeneity, with informality ranging from a low of 20 to 25 percent in Mauritius, South Africa and Namibia to a high of 50 to 65 percent in Benin, Tanzania and Nigeria.
Leandro Medina, Mr. Andrew W Jonelis, and Mehmet Cangul

1. Introduction The characterization of the informal economy has been debated in both policy and academic circles. There is no standard definition of the informal economy in the literature, and terms such as shadow economy, black economy and unreported economy have been used to define it. According to Feige (2005) , the phrase informal economy has been used frequently, and inconsistently; he argues that the informal economy comprises economic activities that circumvent costs and are excluded from the benefits and rights incorporated in laws and