External publications

How does the “Shadow Economy” operate in Egypt’s manufacturing sector? (in Arabic)

El-Haddad, Amirah / Caroline Krafft / Irene Selwaness / Ragui Assaad
External Publications (2026)

published on shorouknews.com, 07.05.26

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Caught between weak employment opportunities and widespread informal employment, Egypt’s manufacturing sector faces a dual challenge. Existing incentives in the labour market encourage both firms and workers to engage in informal employment arrangements. Firms benefit from lower labour costs and greater flexibility, while workers often seek higher take-home pay, driven by limited confidence in the benefits associated with formal employment. Many workers perceive tax and social insurance deductions as offering few tangible benefits or effective safety nets that would compensate for the reduction in current income. At the same time, policies aimed at promoting formal job creation that rely exclusively on stricter enforcement may backfire by increasing hiring costs, thereby creating an additional obstacle for job creation as well as for policymakers. 

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