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Business Formalisation in Vietnam

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  • Brian McCaig
  • Jordan Nanowski

Abstract

We estimate the impact of business formalisation using nationally representative panel data on businesses in Vietnam. Our data allows us to observe businesses for two surveys prior to obtaining a licence and hence to control for differential trends before formalisation. We find that obtaining a licence is not associated with an increase in profits or other business outcomes such as revenue, expenses, and employment once we control for differential trends. Controlling for trends is crucial, as estimates that ignore trends consistently find a larger positive association between becoming licensed and business performance. Our results suggest that inducing more businesses to register is unlikely to bring about large-scale changes for these businesses.

Suggested Citation

  • Brian McCaig & Jordan Nanowski, 2019. "Business Formalisation in Vietnam," Journal of Development Studies, Taylor & Francis Journals, vol. 55(5), pages 805-821, May.
    • Handle: RePEc:taf:jdevst:v:55:y:2019:i:5:p:805-821
    DOI: 10.1080/00220388.2018.1475646
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    Cited by:

    1. Hernando Gutierrez, Luis & Rodriguez-Lesmes, Paul, 2023. "Productivity gaps at formal and informal microfirms," World Development, Elsevier, vol. 165(C).
    2. Colin C. Williams, 2023. "A Modern Guide to the Informal Economy," Books, Edward Elgar Publishing, number 18668, June.
    3. Andrea Floridi & Binyam Afewerk Demena & Natascha Wagner, 2022. "A Game Worth The Candle? Meta-Analysis Of The Effects Of Formalization On Firm Performance," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 27(04), pages 1-27, December.
    4. Nam Hoang Vu & Tram-Anh Nguyen & Tram Bao Hoang & Nguyen Viet Cuong, 2024. "Formal Firms with Bribery in a Dynamic Business Environment," Journal of Business Ethics, Springer, vol. 191(3), pages 571-589, May.
    5. Sènakpon Fidèle A. Dedehouanou & Didier Y. Alia, 2020. "Dynamics of off-farm self-employment in West African Sahel," WIDER Working Paper Series wp-2020-142, World Institute for Development Economic Research (UNU-WIDER).
    6. Max Gallien & Vanessa van den Boogaard, 2023. "Formalization and its Discontents: Conceptual Fallacies and Ways Forward," Development and Change, International Institute of Social Studies, vol. 54(3), pages 490-513, May.
    7. Truong, Thao Duc & Bui, Phuong Cam, 2022. "The lasting effect of formalization on credit access: Evidence from Vietnamese private SMEs," Finance Research Letters, Elsevier, vol. 47(PB).
    8. Hanna Berkel, 2025. "Why Formality Does Not Always Benefit Firms. Learning from Mozambique," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 37(4), pages 721-764, August.
    9. Obinna Franklin Ezeibekwe, 2025. "Business registration from inception and employment indicators using causal machine learning," Empirical Economics, Springer, vol. 68(6), pages 2933-2975, June.
    10. Phan, Le & Nguyen, Hai Thanh, 2025. "Formalization, productivity, and hidden costs: Evidence from Vietnam," Economic Systems, Elsevier, vol. 49(3).

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