Shadow economy and educational systems in Africa

Using data from a sample of 30 countries over the period 2000-15, we find evidence that shadow economy is higher incountries where educational system is focused on general programs. This finding highlights the mismatch between theneeds of the private sector in skilled workers and what the educational system offers in some countries. In addition,we show that vocational education negatively affects the size of the shadow economy, suggesting that it enhancesstudents' opportunities of finding gainful employment in formal sector. We also find that shadow economy in Africa isrelated to financial development, public investment as well as demographic dividend. In terms of public implications,our findings call for the need for a balanced educational system between general and vocational education programmesin order to reduce the size of the shadow economy in Africa.