Conference Paper
Casting Light on Africa’s Shadow Economy
No.
ERF32AC_254
Publisher
ERF
Date
May, 2026
Topic
D7. Analysis of Collective Decision-Making
O1. Economic Development
This paper develops a novel empirical framework integrating satellite imagery and machine learning to estimate the size and dynamics of the shadow economy across all African countries from 2000 to 2024. Addressing the inherent challenges of measuring hidden economic activity, especially in data-scarce and conflict-affected contexts, the study leverages multiple harmonized proxies and advanced econometric techniques to produce robust and granular estimates. We benchmark these results against traditional methods, revealing improved accuracy and new insights into regional heterogeneity between North Africa and Sub-Saharan Africa. Using local projections, we analyze informality’s dynamic response to macroeconomic shocks, while machine learning identifies key drivers of shadow economic activity. Finally, we empirically assess how conflict events and instability affect informality. Our integrated approach delivers the most comprehensive and validated dataset of Africa’s shadow economy to date, offering valuable guidance for policy and further research.