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The Impact of the Informal Sector on Firm Performance: New Evidence for MENA Firms

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  • Hasan Murat ErtuÄŸrul

    (Anadolu University)

  • Ömer Tugsal Doruk

    (Adana Alparslan Türkeş Science and Technology University)

  • Ömer Faruk Tekdogan

    (University of Ankara)

Abstract

This study investigates the impact of the informal sector on firm performance for over 10.000 nonfinancial firms operating in the 8 MENA countries covering 1997-2020 periods. Using a Panel Dynamic Generalized Method of Moments (GMM), we find that the effect of the informal sector on firm performance is negative. These estimates seem strong according to robustness check. We also do the analysis for SMEs and non-SMEs and find that SMEs are more sensitive to the informal sector. In terms of its findings, the study sheds new light on the MENA region by analyzing the relationship between informal economy and firm performance in a highly heterogeneous manner.

Suggested Citation

  • Hasan Murat ErtuÄŸrul & Ömer Tugsal Doruk & Ömer Faruk Tekdogan, 2025. "The Impact of the Informal Sector on Firm Performance: New Evidence for MENA Firms," Working Papers 1814, Economic Research Forum, revised 17 Dec 2025.
    • Handle: RePEc:erg:wpaper:1814
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