Estimating the size of the informal sector in Ghana using the Ghana Living Standards Survey BY MAGNUS EBO DUNCAN

Outline of the presentation  The importance of the informal sector in the Ghanaian economy  Sources of data for the compilation of informal activities  Compilation procedures  Methods of extrapolation  Recommendations

Ghana adapts the informal activity definition as spelt out in the 15 th ICLS resolution  Unincorporated, that is, enterprises owned by individuals or households that are not constituted as separate legal entities independently of their owners, for which no complete accounts are available  All or at least some of the goods or services produced are meant for sale or barter  The size in terms of employment is below a certain threshold to be determined according to national circumstances and/or;  Not registered under specific forms of national legislation as distinct from local regulations for issuing trade licenses or business services;  Engaged in non-agricultural activities including secondary non- agricultural activities of enterprise in the agricultural activities such as retailing of farm produce in the market, fish mongering, and activities of butchers.

In terms of employment, the informal sector continues to grow over the years Employment sector Public Private formal Private informal o.w. agriculture Semi-public/parastatal NGO International organisation0.1

Sources of data for estimation of Ghana’s informal sector

The Ghana Living Standards Survey (GLSS) is the main source of information on majority of informal sector activities Objectives  To provide information on patterns of households’ consumption and expenditure at a lower level of disaggregation. (Information gathered are used for monitoring trends in poverty)  To serve as the basis for the construction of a new basket for the re-basing of the Consumer Price Index.  To provide information for up-dating National Accounts. (A module to collect information on household non-farm enterprises is included in the survey in the last 3 rounds)

GLSS cont.  It is a nationally representative sample survey, using multistage sampling technique in selecting units  A 3-week training of field officers is done, with a lot of hands-on practices  Data collection is undertaken throughout the year to iron out seasonality in consumption and production  A field officer stays with selected households in an EA for at least 30days before moving to other selected EA  Data entry is done concurrently with data collection. This helps in errors being corrected before field officers leave the EA The frequency of the survey should be 5-years but because of logistical constraints, the last 3 rounds have been 7-year intervals

Population census data: employment sector cross- classified by sector of activity used as raising factor

The GLSS data is supported by “stand alone” surveys on some informal activities as well as indirect estimation methods  E.g. Small-scale road and lake transport survey conducted in 2007 which provided input/output estimates of operation of commercial transport by road and river  Livestock production model developed to estimate output of domestic livestock  In some activities, consumption and expenditure estimates provide more reliable estimates of output than direct estimates e.g. households as employers, prostitution etc.

Set of questions to help identify persons involved in informal economic activities

ECONOMIC ACTIVITY STATUS AND CHARACTERISTICS OF MAIN AND SECONDARY OCCUPATION  Q4A, 20-What was the status of (NAME) in this job?  There are other sub-sections that collect information on secondary activity in the last 7 days  There is another subsection that collect information on those who didn’t work in the last 7 days for reasons other than unemployment such as temporary absence from work, seasonal nature of job, and those who worked within the last 12 months but are currently not working CODES FOR QUESTION 20 A paid employee Non-Agric Self employed  With employees  Without employees Contributing family worker Agric Self employed  With employees  Without employees Contributing family worker Domestic employee (house help)… Casual workers Apprentice Other(specify)…………………………..….11

SECTION 6 Q10. COPY FROM SECTION 4A AND/OR 4B THE IDs OF ALL MEMBERS WHO ANSWERED Q.20 AND/OR Q.8 (SECTION 4E Q.14 OR SECTION 4FQ9) = 2 OR 3 IN ADDITION COPY THE ACTIVITY NAME AND THE CORRESPONDING ISIC CODE

Non-farm household enterprise questionnaire collects information on the following ………  Basic characteristics of the enterprise  Detailed Employment  Wages and Earnings  Output and intermediate consumption (different templates for different activities)  Other revenue and expenditure  Capital formation  Consumption, payments and savings

COMPILATION OF ESTIMATES

Formula for computing the aggregates is very important  Since different sets of questions and templates with different reference periods are used in capturing information from the different activities, a single formula cannot be used for all activities, therefore  Formula for compiling the aggregates are designed for the IT staff working on the data

Estimates from the sample

Grossing-up of estimates using employment data from population census

Improvements in the estimates  The gaps in the estimates are bridged using the SUT  For owner-occupied dwelling, hedonic rent model is used

Extrapolation of baseline estimates (Since the surveys are not conducted annually, indicators are used in extrapolating baseline estimates)

Difficult to measure statistically, because ……  it covers a variety of activities with different modes of operation  large number of units to be surveyed  the units are often characterized by features which make their statistical measurement difficult.

Extrapolation of some of the activities are problematic as formal sector activities are used as proxies

Weaknesses in some of the extrapolators  Trend in the performance of the formal sector may not necessarily be the same for the informal component, such as a ) taxation and other government policies may not have the same impact on the formal and informal sector, which can shift demand due to differential pricing b) change in production environment or technology can affect output since production methods are usually different for informal (more manual)and formal (more automated)

Recommendations  NSOs should take advantage of household surveys (non-economic) to include questions that can provide some data on economic statistics  Intensive training for data collectors using different activities across the country as hands-on practices during the training.  The code books for ISCO and ISIC should be customized to make easy reference for field officers. In the case of Ghana, all occupations and activities with easily identifiable localized names were coded and the names (not the codes) arranged in the alphabetical order for easy reference.  Valuation techniques are also key for generating good estimates.

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