Constrained Gazelles: High Potentials in West Africa’s Informal Economy

SummaryThe informal sector is typically characterized as being very heterogeneous and possibly composed of two clearly distinct segments, sometimes called the lower and upper tiers. However, empirical evidence shows that even among lower tier entrepreneurs profitability can be quite high. We combine these findings and develop an innovative approach to identify what we call “constrained gazelles”, next to the well-known survivalists in the lower tier and growth-oriented top-performers in the upper tier. Our sample of informal entrepreneurs in seven West-African countries allows to link the relative size of these three groups to the structural and macroeconomic environment in these countries.