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Informality and Firm Performance in Myanmar

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  • Hanna Berkel
  • Finn Tarp

Abstract

Using a unique panel survey of enterprises, we examine the relationship between four categories of formalization and firm productivity. We carry out one- and two-step productivity estimations whose robustness we check with matching and doubly robust estimators. The only formalization category that appears to be significantly associated with productivity is tax formalization, i.e. a firm’s decision to pay taxes. This positive association only holds for firms that were already more productive and bigger before formalizing than other informal firms. The reason for the insignificance of the remaining three categories is likely to be the insignificant association between formalization and potential benefits of formalization, such as more access to credit, employees, and investments. High taxes and fees linked to formalization seem to outweigh the few to non-existent intermediate benefits of formalization.

Suggested Citation

  • Hanna Berkel & Finn Tarp, 2022. "Informality and Firm Performance in Myanmar," Journal of Development Studies, Taylor & Francis Journals, vol. 58(7), pages 1363-1382, July.
    • Handle: RePEc:taf:jdevst:v:58:y:2022:i:7:p:1363-1382
    DOI: 10.1080/00220388.2022.2061849
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    Cited by:

    1. 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.
    2. 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.
    3. Tchapo Gbandi & Ayira Korem & Kossiwa Zinsou-Klassou, 2024. "Save women entrepreneurs: gender, cultural context, and micro-commerce performance in Togo," Small Business Economics, Springer, vol. 62(3), pages 1099-1133, March.
    4. Henrik Hansen & S. Kanay De & John Rand & Neda Trifković, 2023. "Wage returns to workplace training in Myanmar," Development Policy Review, Overseas Development Institute, vol. 41(2), March.
    5. Dumenu, William Kwadwo & Appiah, Louis Gyekye & Paul, Carola & Darr, Dietrich, 2023. "Should forest enterprises formalize? Insight from a multi-dimensional characterization of informal baobab enterprises," Forest Policy and Economics, Elsevier, vol. 150(C).
    6. Damien GIROLLET, 2023. "Digital divides among microsized firms: Evidence from Sub-Saharan Africa," Bordeaux Economics Working Papers 2023-03, Bordeaux School of Economics (BSE).

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