This study analyzes the impact of informal economy on the employment in Egypt using ARDL model to test the long run relationship between the two variables. Data is collected from World Bank and ILO for the variables in estimation from (1991 – 2021), the results show that there is a long run relationship between the two variables, depending on the available data, therefore the study recommends fostering the process of integrating informal economy into formal economy to enhance the employment sector directly and to enhance the macroeconomic indicators indirectly, as the Egyptian economy has a special nature regarding its demographic characteristics, and its workforce.
Informal economy is a major phenomenon in the economies of all countries around the world, no matter the country is developing or developed one, the informal economy exists. The difference between countries is just in the size of the informal economy, which depends on many factors, such as, the market size, the skills of the labor force, the gap between labor demand and labor supply, and stability and reliability of the economic institutions or the state's governance.