Is there a threshold effect of global value chains on informal employment in Sub-Saharan Africa?

Purpose The objective of this paper is to determine the threshold effect of global value chains (GVCs) on informal employment in Sub-Saharan Africa (SSA). Design/methodology/approach To achieve our objective, we construct a panel of 32 Sub-Saharan African countries over the period 1991–2017 and a panel smooth transition regression model to estimate the threshold effect. Findings We find that the GVC participation index affects informal employment at the 0.18% threshold and that downstream participation affects informal employment at the threshold of 0.0117%, with threshold ranges from 0.0108% to 0.0117%. However, the dynamic threshold model does not allow downstream participation to be taken into account, and only the index of GVCs has an influence on informal employment in SSA, with a threshold of 0.04%. Research limitations/implications Future research could, for example, disaggregate by sector, examine the gender impacts of informality in GVCs, evaluate national case studies of formalisation induced by GVCs and explore the role of technology in reshaping informal work (e.g. platform economies). Practical implications This study recommends that Sub-Saharan African countries need to focus more on domestic value added by promoting processing sectors such as manufacturing and industry. Secondly, the fact that life expectancy at birth is increasing informality, the paper also argues to promote a regulatory framework for the labour market such as an intergenerational rotation mechanism to create enough formal jobs to absorb the young workforce. Originality/value This study therefore stands out because it captures the non-linear effects of participation in GVCs on informal employment and identifies thresholds precisely and differentially according to the type of participation (global, downstream or upstream). This provides a new understanding of the dynamics of informal employment in the context of trade integration.