Determinants of earnings in the urban informal sector: A case study of mechanics in Nairobi

Abstract

The aim of this study is to examine informal sector earnings with a view to suggesting appropriate policies to increase employment and earnings. Econometric methods are applied to data from 120 informal sector operations in Kirinyaga, Burma and Nyayo Engineering works, three locations in Nairobi. The data were obtained through fieldwork undertaken in three areas in March 1987. The study has shown that the factors that influence the informal sector earnings fall in to three main categories:- 1) Human capital variables, for example their level of formal education, their training, experience and age. 2) Demographic variables, for example, family size 3) Value of tools An interesting result of this study is that institutional factors play an important role in influencing the earnings of the informal sector operators. The study recommends the relaxation of these regulations that inhibit the expansion of the informal sector and advocate for the provision of basic infrastructure to the informal sector.