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Formal registration and informal firms in Cambodia

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  • Tanaka, Kiyoyasu

Abstract

This paper estimates the impact of formal registration on firm-level performance. I construct a unique panel dataset on both formally registered and unregistered establishments in Cambodia for 2011 and 2014. The sample includes 8,350 informal firms in 2011, of which 216 firms obtained a formal registration in 2014. To mitigate selection bias, I employ a difference-in-differences method combined with propensity-score matching and a propensity-score-weighted regression method.My results show a significantly positive impact of formalization on sales and value added, but little significant effect on labor productivity. Formalization increases non-wage expenditures significantly, consistent with the hypothesis that formalized firms increase their purchases from other formal firms to benefit from Cambodia’s value added tax system.

Suggested Citation

  • Tanaka, Kiyoyasu, 2021. "Formal registration and informal firms in Cambodia," IDE Discussion Papers 807, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper807
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    Keywords

    Informal sector; formalization; registration; Cambodia;
    All these keywords.

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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