Publication: Deconstructing the Missing Middle: Informality and Growth of Firms in Sub-Saharan Africa
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Published
2022-11
ISSN
Date
2022-11-17
Author(s)
Fattal Jaef, Roberto N.
Maemir, Hibret Belete
Maemir, Hibret Belete
Editor(s)
Abstract
This paper characterizes the firm size distribution by exploiting establishment-level censuses covering both formal and informal firms in Sub-Saharan Africa. The paper finds a "missing middle" in the employment-based size distribution of firms in four Sub-Saharan African countries. This "missing middle" hinges on the inclusion of informal firms, and it is not explained by state- or foreign-owned firms at the top of the size distribution, nor does it emerge from the size distribution of entrants. The paper reconciles these empirical results with a model of firm dynamics with endogenous informality and shows that calibrated values of entry barriers and productivity-dependent idiosyncratic distortions generate a "missing middle" that is consistent with its underlying drivers in the data.
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Citation
“Fattal Jaef, Roberto N.; Abreha, Kaleb Girma; Maemir, Hibret Belete; Cirera, Xavier; Maemir, Hibret Belete; Davies, Elwyn. 2022. Deconstructing the Missing Middle: Informality and Growth of Firms in Sub-Saharan Africa. Policy Research Working Papers;10233. © World Bank. http://hdl.handle.net/10986/38324 License: CC BY 3.0 IGO.”
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