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Informality, Size and Regulation: Theory and an Application to Egypt

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  • Giugale, Marcelo M
  • El-Diwany, Sherif
  • Everhart, Stephen S

Abstract

The paper shows how, when the enforceability of regulations is size-sensitive, price competition can lock firms into informality and, thus, smallness, depending on the form of the production function. In that context, exogenous "help" packages targeted to informal firms "promote" micro and small enterprises (i.e., increase their numbers) but do not "develop" them (i.e., foster their growth). The "help" only generates a short-term span of abnormal profits for existing informal firms, and a long-term income transfer toward informal-market consumers. The model is tested in the context of Egypt's micro and small enterprise sector. Copyright 2000 by Kluwer Academic Publishers

Suggested Citation

  • Giugale, Marcelo M & El-Diwany, Sherif & Everhart, Stephen S, 2000. "Informality, Size and Regulation: Theory and an Application to Egypt," Small Business Economics, Springer, vol. 14(2), pages 95-106, March.
    • Handle: RePEc:kap:sbusec:v:14:y:2000:i:2:p:95-106
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    Cited by:

    1. Nguyen, Thi Minh Hieu & Nguyen, Thi Huong Giang & Vu, Thi Minh Ngoc & Nguyen, Viet Duc, 2013. "Whether or not the informal economy as an engine for poverty alleviation in Vietnam," MPRA Paper 48378, University Library of Munich, Germany.
    2. Elaine Laing & André Stel & David J. Storey, 2022. "Formal and informal entrepreneurship: a cross-country policy perspective," Small Business Economics, Springer, vol. 59(3), pages 807-826, October.
    3. Justin van der Sluis & Mirjam van Praag & Wim Vijverberg, 2003. "Entrepreneurship Selection and Performance," Tinbergen Institute Discussion Papers 03-046/3, Tinbergen Institute, revised 24 Sep 2004.
    4. Beegle,Kathleen G. & Benjamin,Nancy Claire & Recanatini,Francesca & Santini,Massimiliano, 2014. "Informal economy and the World Bank," Policy Research Working Paper Series 6888, The World Bank.

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