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Formal Registration and Informal Firms in Cambodia

Author

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  • KIYOYASU TANAKA

    (Institute of Developing Economies, Japan External Trade Organization (IDEJETRO), Japan)

Abstract

Encouraging informal firms to register with the government is a key policy issue for developing economies. However, the impact of formal registration on firm performance remains inconclusive. This paper constructs a nationally representative panel data set on registered and unregistered establishments in Cambodia by using the Economic Census in 2011 and the Inter-censal Economic Survey in 2014; the Economic Census surveyed all nonfarm establishments and enterprises without any establishment-size threshold, which served as a credible sample frame for the Inter-censal Economic Survey. 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 that formalization has a significantly positive impact on sales, value added, and regularly employed workers, but yields little effect on labor productivity. While formal registration alone may not boost productivity, it can encourage the business growth of formalized firms by hiring more formal workers.

Suggested Citation

  • Kiyoyasu Tanaka, 2023. "Formal Registration and Informal Firms in Cambodia," Asian Development Review (ADR), World Scientific Publishing Co. Pte. Ltd., vol. 40(01), pages 151-176, March.
    • Handle: RePEc:wsi:adrxxx:v:40:y:2023:i:01:n:s0116110523500038
    DOI: 10.1142/S0116110523500038
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    Keywords

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

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • 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

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