This study examines the relationship between the informal economy and the formal economy by
undertaking to answer the following question: what is the impact of tax and employment policies
on the informal economy and poverty in Cameroon? To achieve this, we adopt a
methodological approach in general equilibrium (CGE) based on the works of Decaluwe et al.
(2012) and Montaud (2000). The model is implemented using a Social Accounting Matrix (SAM)
previously constructed from the 2010 national accounts and then disaggregated using ECAM3
and EESI2 survey data, available at the National Institute of Statistics. The simulation results show
that an increase in skilled employment in the formal sector generates a decline in economic
activity in the informal sector. This results in improved growth of GDP at market prices and a
significant reduction of poverty. By contrast, fiscal policies do not have strongly differentiated
effects between the formal and informal sectors. In addition, a taxation of products in the informal
sector amplifies poverty.
