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Can Enhancing the Benefits of Formalization Induce Informal Firms to Become Formal? Experimental Evidence from Benin

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  • Benhassine, Najy
  • McKenzie, David J.
  • Pouliquen, Victor
  • Santini, Massimiliano

Abstract

A randomized experiment based around the introduction of the entreprenant legal status in Benin is used to test the effectiveness of supplementary efforts to enhance the presumed benefits of formalization by facilitating its links to government training programs, support to open bank accounts, and tax mediation services. Few firms register when just given information about the new regime, but the full package of supplementary efforts boosts formalization by 16.3 percentage points. Firms that are larger, and that look more like formal firms to begin with, are more likely to formalize, providing guidance for better targeting of such policies

Suggested Citation

  • Benhassine, Najy & McKenzie, David J. & Pouliquen, Victor & Santini, Massimiliano, 2017. "Can Enhancing the Benefits of Formalization Induce Informal Firms to Become Formal? Experimental Evidence from Benin," CEPR Discussion Papers 11764, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:11764
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    References listed on IDEAS

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    1. Yoav Benjamini & Abba M. Krieger & Daniel Yekutieli, 2006. "Adaptive linear step-up procedures that control the false discovery rate," Biometrika, Biometrika Trust, vol. 93(3), pages 491-507, September.
    2. Rafael La Porta & Andrei Shleifer, 2014. "Informality and Development," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 109-126, Summer.
    3. Suresh de Mel & David McKenzie & Christopher Woodruff, 2013. "The Demand for, and Consequences of, Formalization among Informal Firms in Sri Lanka," American Economic Journal: Applied Economics, American Economic Association, vol. 5(2), pages 122-150, April.
    4. repec:eee:labeco:v:45:y:2017:i:c:p:143-157 is not listed on IDEAS
    5. David McKenzie & Christopher Woodruff, 2014. "What Are We Learning from Business Training and Entrepreneurship Evaluations around the Developing World?," World Bank Research Observer, World Bank Group, vol. 29(1), pages 48-82.
    6. Miriam Bruhn & David McKenzie, 2014. "Entry Regulation and the Formalization of Microenterprises in Developing Countries," World Bank Research Observer, World Bank Group, vol. 29(2), pages 186-201.
    7. Campos, Francisco & Goldstein, Markus & McKenzie, David, 2015. "Short-term impacts of formalization assistance and a bank information session on business registration and access to finance in Malawi," Policy Research Working Paper Series 7183, The World Bank.
    8. Anderson, Michael L., 2008. "Multiple Inference and Gender Differences in the Effects of Early Intervention: A Reevaluation of the Abecedarian, Perry Preschool, and Early Training Projects," Journal of the American Statistical Association, American Statistical Association, vol. 103(484), pages 1481-1495.
    9. Galiani, Sebastian & Meléndez, Marcela & Ahumada, Camila Navajas, 2017. "On the effect of the costs of operating formally: New experimental evidence," Labour Economics, Elsevier, vol. 45(C), pages 143-157.
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    More about this item

    Keywords

    Informality; Regulatory Simplification; Small Enterprises;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • 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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