Grimm, Michaelvan der Hoeven, RolphLay, Jann2017-06-052017-06-052011-11https://hdl.handle.net/10986/26878In the past two decades, research on the informal sector has emphasized the heterogeneity of this part of the economy, example in terms of entry costs, firm size, and access to credit, forward- and backward linkages as well as human and physical capital endowments. Yet, not much research has investigated the causes of this heterogeneity and the implied inefficiencies. This is true in particular for Sub-Saharan Africa, where informality dominates urban labor markets. Understanding these causes and the implied inefficiencies is however necessary to design policy interventions that are able to remove the most binding constraints for informal entrepreneurs. This note summarizes the main findings and policy conclusions from a research project that analyzes the quantitative importance of various constraints to informal enterprises in West Africa and Madagascar.en-USCC BY 3.0 IGOADVANCED COUNTRIESADVERSE INCENTIVEAGRICULTUREBANK POLICYBARRIERS TO ENTRYBINDING CONSTRAINTBUSINESS DEVELOPMENTBUSINESS ENVIRONMENTBUSINESS RISKCAPACITY BUILDINGCAPITAL ACCUMULATIONCAPITAL CONSTRAINTSCAPITAL INTENSITYCAPITAL INVESTMENTCAPITAL MARKETCAPITAL RETURNSCAPITAL SHORTAGESCAPITAL STOCKCOMPETITION POLICIESCONTRACT ENFORCEMENTCREDIT CONSTRAINTSCREDIT MARKETCREDIT PROGRAMCREDIT PROVIDERSDATA ANALYSISDEGREE OF RISKDEVELOPING COUNTRIESDISTRIBUTION CHANNELDYNAMIC ECONOMIESE-MAILECONOMIC ACTIVITIESECONOMIC CONSTRAINTSECONOMIC DEVELOPMENTELECTRICITYEMPLOYMENTENTERPRISE PERFORMANCEENTREPRENEURENTREPRENEURSHIPENTRY BARRIERSEXPANSIONEXPENDITURESEXPOSUREFINANCIAL SERVICESFINANCIAL SUPPORTFIRM GROWTHFIRM PERFORMANCEFIRM PERFORMANCESFIRM SIZEFIRMSFORMAL ECONOMYGOVERNMENT REGULATIONSGROWTH POTENTIALHOLDINGHOUSEHOLD INCOMESHOUSEHOLD WEALTHHUMAN CAPITALIMPACT ASSESSMENTINCENTIVE EFFECTSINCOMEINDUSTRIAL DEVELOPMENTINFORMAL ECONOMYINNOVATIONINSTITUTIONAL BARRIERSINSTITUTIONAL CONSTRAINTSINSURANCEINTEREST RATESINTERNATIONAL LABOUR ORGANIZATIONINVENTORYINVESTINGINVESTMENT DECISIONSINVESTMENT OPPORTUNITIESINVESTMENT RATESJOB CREATIONLABOR MARKETLAW ENFORCEMENTLEGAL FRAMEWORKSLOANLOCAL MARKETMANAGERIAL SKILLSMARKET CONSTRAINTSMENUMICRO-CREDITMICRO-DATAMICROCREDITMICROENTERPRISESMICROFINANCEMICROFINANCE INSTITUTIONMICROFINANCE LOANSMONEY LENDERSNUMBER OF VISITORSOUTPUTSPHONEPHYSICAL CAPITAL INVESTMENTSPOVERTY ALLEVIATIONPRIVATE SECTORSPRODUCTIVITYRAPID EXPANSIONRE-INVESTMENTREMITTANCESREPUTATIONRESULTRETURNRISK AVERSERISK AVERSIONRISK-AVERSE INDIVIDUALSSAVINGSSMALL BUSINESSESSMALL ENTERPRISESSMALL FIRMSOCIAL CAPITALSOCIAL NETWORKSSUPERMARKETSTAXTAXATIONTELECOMMUNICATIONTOTAL FACTOR PRODUCTIVITYTRANSMISSIONTRUST FUNDWORKING HOURSWORLD ECONOMYWorking PaperWorld Bank10.1596/26878