Motivating Factors of Informal Trade in Intermediate Cities of Ecuador: Application of the Factorial Model

Gabith Quispe Fernandez,Marlon Villa Villa,Rodrigo Velarde Flores,Marieta Tapia Muñoz,Dante Ayaviri Nina

doi:10.5539/ies.v13n8p42

Abstract

This research aims to identify the motivating factors that influence the development of informal trade by merchants in the Republic of Ecuador. For this, the inductive method, at causal-statistical level, is applied; making use of a questionnaire as an information collection tool, with a sample of 310 informal merchants from a population of 3,600 located in the city of Riobamba. Factor analysis and linear regression are used. Results show that informal activity is related to unemployment, independence and necessity; being that informal trade depends on age, marital status, ethnicity, area, economic income, location, need, and lack of knowledge about public spaces and taxation regulations.

Highlights

Research on informal activity, such as the International Labour Organization (ILO), OIT (2002, 2014, 2016, 2019), ILO (2012, 2014), World Bank (2013, 2019) and others, show that “informal workers routinely face higher risks of poverty than workers of the formal economy and that informal economy work, poverty, and vulnerability are highly related” quoted in Quispe et al (2018, p. 4)
Research results show that people who engage in informal commerce are 74.8% female and 25.2% male
Informal trade activity is not directly related to age, marital status, economic income and income level, but to the contribution of other factors: such as ethnicity, location, necessity, ignorance of public spaces regulation, and taxes; being these, motivating factors that significantly influence the informal trade activity done by merchants

Summary

Introduction

Research on informal activity, such as the International Labour Organization (ILO), OIT (2002, 2014, 2016, 2019), ILO (2012, 2014), World Bank (2013, 2019) and others, show that “informal workers routinely face higher risks of poverty than workers of the formal economy and that informal economy work, poverty, and vulnerability are highly related” quoted in Quispe et al (2018, p. 4). The data show that trade is a formal activity with a high participation in the labour market, as seen, where for example in 2016, it represents 32.3%, followed by communal, social and personal service activities, representing 22.1% (OIT, 2018). This formal activity has been facing a series of economic and social problems, since the informal trade sector has increased in different countries, mainly in Ecuador, especially around local markets in cities. According to data collected in this research, it is seen that–in no more than two years–around 200 more people started activities as merchants in close-by areas to markets, without neglecting the presence of sale-points in different streets of the cities, mainly offering agricultural and clothing products

Objectives

Methods

Results

Conclusion