Publication: Do Informal Firms Want to Formalize and Does It Help Them If They Do?
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2012-03
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2012-03
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Most firms in developing countries are informal. Does it make sense for them to formalize? Hernando de Soto has famously argued that informal firms would like to be formal, only that burden some entry barriers prevent them. The result, spurred by the efforts of doing business and investment climate reform efforts has been efforts around the world to streamline the entry process. However, a countervailing view of informality views informal firm owners as rationally weighing up the costs and benefits of formalizing, and rationally choosing only to become formal when they grow large enough to benefit from the formal institutions of society. In this view, smaller, less productive firms don't see any gain to formalizing, so choose not to.
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“Mel, Suresh de; McKenzie, David; Woodruff, Christopher. 2012. Do Informal Firms Want to Formalize and Does It Help Them If They Do?. Finance and PSD Impact; No. 17. © World Bank. http://hdl.handle.net/10986/10053 License: CC BY 3.0 IGO.”
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