Spatial Inequality, Poverty and Informality in the Democratic Republic of the Congo

Abstract

We construct a model incorporating labor market frictions to elucidate income disparities among provinces, sectors (formal vs. informal), and skill categories (skilled vs. unskilled) within the Democratic Republic of the Congo. Through quantitative analysis, we demonstrate the significance of technologies, human capital, infrastructure, and labor market frictions in explaining spatial and intra-province inequalities. Although technological disparities emerge as the primary drivers, our findings underscore the presence of strong “O-ring” inequality patterns. This implies that effective development policies necessitate a mix of coordinated policy measures. When considered in isolation, policies focused on enhancing education, infrastructure, and mitigating labor market frictions could potentially escalate poverty along the intensive margin. Additionally, a development policy disregarding the informal sector also yields counterproductive distributional and poverty outcomes.