Browsing by Author "Salmon, Mugoda"

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The portrait of Uganda’s informal sector: What main obstacles do the sector face?
(Cogent Economics & Finance, 2020-10) Salmon, Mugoda; Stephen, Esaku; Rose, Kibuka Nakimu; Edward, Bbaale
In this paper, using primary data collected from business owners, we examine the nature and obstacles in the informal sector of Uganda. We find that education level matters in the selection of enterprises. The bulk of businesses, like eating kiosks, fish selling, shoe shining among others that require no specialized skill to operate were mainly run by primary school dropouts and those with no formal level of education. Furthermore, we find evidence of a strong entrepreneurial spirit among secondary school dropouts than at any other education level. Across all businesses surveyed, secondary school dropouts run a high number of informal enterprises. Evidence suggests that their motivation is driven by two key factors, namely, wanting to take advantage of an existing business opportunity and failure to find employment in the formal sector. The empirical results show that access to finance, crime, theft and disorder, electricity, water, taxes, burdensome inspections, and informal gifts are robust and significant obstacles to the operations of the informal sector in Uganda. Policies should focus on a regulatory framework that supports the sector to create secure livelihoods and generate employment opportunities for the unemployed rather than viewing the sector as a source of “illegality.” Improving access to finance, providing regular power and water supply, and improving the tax regime would mitigate the obstacles faced by informal businesses leading to possible formalization. Informal sector businesses should not be perceived as “illegal entities” but rather complementary effort by an increasingly enterprising population in the country.
The shadow economy and education in Uganda: Is there a long-run relationship?
(International Social Science Journal., 2023) Stephen, Esaku; Salmon, Mugoda
Using time series data from Uganda covering the period from 1991 to 2017, this paper applies auto regressive distributed lag bounds testing approach to examine the long- and short-run relationship between education and the shadow economy. We find evidence of the long-run relationship. The results indicate that an increase in both primary and secondary school enrolment significantly reduce the size of the shadow economy in the long run, all else equal. The above relationship is robust to alternative specification and estimation methods. We also uncover bidirectional causal relationship between education and the shadow economy. In the short run, increased school enrolment reduces the shadow economy but in an insignificant manner. At the policy level, the existence of a negative relationship between education and the shadow economy suggests that mitigating informality requires reforming education system to address issues of quality. Additionally, addressing informality may require improving the economic and financial environment so that the needs and obstacles faced by individuals and or businesses are handled. Furthermore, reforming the political and institutional environment may go a long way into mitigating the expansion of the shadow economy in Uganda and Africa in general.