INFORMAL ECONOMY IN ALGERIA: ANALYSIS OF THE EVOLUTION OF THE PHENOMENON AND MACROECONOMIC EVALUATION (1990-2009)

Abstract

The aim of this study is to analyze the determinants of the informal economy in Algeria and its evolution over the 1999-2009 period .To this end, the econometric tool is mobilized through the use of MIMIC method (Multiple indicators and multiple causes) to model the relationships between different variables and estimate the size of this economy from a macroeconomic perspective. Through this modeling test of the informal economy in Algeria, the study shows that public expenditure, inflation, unemployment and SNMG(national guaranteed minimum wage) are the main variables explanatory of the size of this phenomenon . In addition the results indicate that the high level of informality of the Algerian economy is linked mainly to institutional causes which explain in the same time the weak performance of that economy. The voluminous nature of public spending and its bureaucratic management, the labor market imbalances, the lack of control of the prices and the monetary circulation and the low incomes of employees pave the way for the emergence of any kind of informality in the economy.