Publication: Entry Regulation and the Formalization of Microenterprises in Developing Countries
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Date
2014-08-05
ISSN
1564-6971
Published
2014-08-05
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Abstract
The majority of microenterprises in most developing countries remain informal despite more than a decade of reforms aimed at making it easier and cheaper for them to formalize. This paper summarizes the evidence on the effects of entry reforms and related policy actions to promote firm formalization. Most of these policies result in only a modest increase in the number of formal firms, if there is any increase at all. Most informal firms appear to not benefit on net from formalizing. As a consequence, ease of formalization along will not induce most of them to become formal. Increased enforcement of rules can increase formality. Although there is a fiscal benefit of doing this with larger informal firms, it is unclear whether there is a public rationale for attempting to formalize subsistence enterprises.
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“McKenzie, David; Bruhn, Miriam. 2014. Entry Regulation and the Formalization of Microenterprises in Developing Countries. World Bank Research Observer. © World Bank. http://hdl.handle.net/10986/24188 License: CC BY-NC-ND 3.0 IGO.”
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