Assessment of driving factors, transition intention and constraints of urban informal economy: the case of street vendors in Addis Ababa city administration

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Addis Ababa University


The informal economy plays an important, yet often overlooked, role in economy throughout the world. Informal activities can provide a much needed source of income for a great number of people. At the same time, informality motivated by regulatory distortions, tax evasion, or in the pursuit of illegal activities can be a development trap that deprives governments of needed funds and leaves participants without legal protection. The main aim of this study has been to assess the driving factors, transition intention and constraints of urban informal economy, the case of street vendors in Addis Ababa city administration. The informal economy is an important part of economic, social and political life in most developing, as well as some developed economies. To understand the contribution of informal economy to employment opportunity and GDP, several scholars have conducted researches on informal economy focusing on the causes and constraints at international and national level. This study used a qualitative research method. Questionnaire and in-depth interview were used to gather pertinent data for the study. The collected questionnaire survey data were analyzed using SPSS version 22 software. The researcher has taken 198 street vendors purposively for survey questionnaire and the sample size calculated using sample size determination formula for unknown population size. In-depth interview was also conducted with selected street vendors. Descriptive statistics such as percentages, frequencies and tables are used to analyze and present the data. The study found that the main factors determining the reason in the informal sector are unable to fulfil criteria of formal sector and lack of capital to start formal business. Street vendors also have transition intension to formal sectors. The study reveals that informal sectors are source of income for the poor or means of employment and also it is a base for formal sector. This study shows that the majority of the street vendor’s constraint was shortage of capital and low price for products. As recommendation, the government should give much emphasis on rural job opportunity for youth to reduce rural to urban migration and informal sectors. In addition, provide financing opportunity to those who do not have capital to start formal business.


A thesis submitted to college of business and economics Prepared in partial fulfillment of the requirements Of master of business administration (MBA) Degree


Constraints, Informal market, Lack of capital