Informal sector labour demand: Evidence from Zimbabwe’s urban informal metal sector

Abstract

This paper investigates the major determinants of labour demand in Zimbabwe’s urban informal metal sector. Furthermore, the study looks at employment trends in the urban informal metal sector. The paper employs the ordinary least squares (OLS) technique and three stage least squares (3SLS) to take care of the endogeneity problem. The study establishes that Zimbabwe’s urban informal metal firms use paid and unpaid labour in production. The paid and unpaid labour comprises business owners, family members and employees. The largest category is business owners followed by employees and then family members. The econometric approach focuses on paid labour. The conclusion from the econometric results is that wages depend on output hence promotion of informal sector jobs requires that informal firms be assisted in establishing markets for their products. Thus, in order to increase informal employment, policymakers have to put in place policies that boost markets for informal sector products.

Keywords: informal sector, labour demand, metal sector