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Informal Microenterprises in Senegal : Performance Outcomes and Possible Avenues to BoostProductivity and Jobs

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  • Atiyas,İzak
  • Dutz,Mark Andrew

Abstract

This paper explores differences and similarities across formal and informal microenterprises inSenegal. It uses a new national sample of more than 500 firms, of which two-thirds are informal and over 95 percentare micro-size, employing five or fewer full-time employees. The analysis finds that formal firms have averageperformance outcomes that are in the range of three to five times higher than informal firms. Formal firms are also morelikely than informal firms on average to possess “good” characteristics, namely assets and uses of digitaltechnologies that are positively correlated with productivity, sales, exporting, and employment. Despitethese average differences, informal firms are highly heterogeneous, with a sizable number similar to formal firmsin terms of both performance outcomes and good characteristics: the share of informal firms in the topproductivity and sales deciles having good characteristics is substantial, and one-third of all firms in thehigh-performance cluster based on a data-driven combination of the four performance variables are informal firms.Importantly, several characteristics that are correlates of better performance (being in the top two clusters) forinformal firms are identical to those for all firms in the high-performance cluster: having electricity, having had aloan, and in terms of uses of digital technologies, having a smartphone and using a mobile phone to communicate withsuppliers and customers. However, a sizable number of high-performance informal firms are lagging in terms of good characteristics. That roughly half of formal firms and noinformal firm had a loan implies that it is possible to be in the top performance cluster even without having access tosuch formal financing. That over half of formal firms in the top cluster as well as in the top decile of productivity andsales use inventory control/point of sales software as a management tool while only one informal firm does is bothindicative of the small number of informal firms that use these technologies and suggestive of the potential forperformance improvements if such technologies were used more widely.

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  • Atiyas,İzak & Dutz,Mark Andrew, 2022. "Informal Microenterprises in Senegal : Performance Outcomes and Possible Avenues to BoostProductivity and Jobs," Policy Research Working Paper Series 10111, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10111
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    References listed on IDEAS

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    1. Gabriel Ulyssea, 2020. "Informality: Causes and Consequences for Development," Annual Review of Economics, Annual Reviews, vol. 12(1), pages 525-546, August.
    2. Loayza, Norman V., 1996. "The economics of the informal sector: a simple model and some empirical evidence from Latin America," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 45(1), pages 129-162, December.
    3. Gabriel Ulyssea, 2018. "Firms, Informality, and Development: Theory and Evidence from Brazil," American Economic Review, American Economic Association, vol. 108(8), pages 2015-2047, August.
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