What Determines Productivity in Senegal? Sectoral Disparities and the Dual Labour Market

This paper analyses the output gap between the formal and informal sectors in Senegal using a matched employer-employee database. While the production process in some informal sub-sectors is similar to the one in the formal sector, there is evidence that the economy is deeply cleaved between productive and non-productive firms within the informal sector and between voluntary and involuntary jobs on a labour market which proves to be dual. We find that education externalities are significant although modest in both sectors and that the differences in human and physical capital account for about two thirds of the output gap.