IDEAS home Printed from https://ideas.repec.org/p/erg/wpaper/1814.html

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://erf.org.eg/publications/the-impact-of-the-informal-sector-on-firm-performance-new-evidence-for-mena-firms-2/
    Download Restriction: no
    File URL: https://erf.org.eg/app/uploads/2025/12/1767118880_627_572006_1814.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hanousek, Jan & Kochanova, Anna, 2016. "Bribery environments and firm performance: Evidence from CEE countries," European Journal of Political Economy, Elsevier, vol. 43(C), pages 14-28.
    2. Ceyhun Elgin & Serdar Birinci, 2016. "Growth and Informality: A Comprehensive Panel Data Analysis," Journal of Applied Economics, Taylor & Francis Journals, vol. 19(2), pages 271-292, November.
    3. Orhan Erem Atesagaoglu & Deniz Bayram & Ceyhun Elgin, 2017. "Informality and structural transformation," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 17(4), pages 117-126.
    4. Colin C. Williams & Abbi M. Kedir, 2017. "Evaluating The Impacts Of Starting Up Unregistered On Firm Performance In Africa," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 22(03), pages 1-20, September.
    5. Colin C. Williams & Abbi M. Kedir, 2017. "Starting-up unregistered and firm performance in Turkey," International Entrepreneurship and Management Journal, Springer, vol. 13(3), pages 797-817, September.
    6. ÖMer Tuäžsal Doruk, 2023. "Macroeconomic Determinants Of Firm Performance: Evidence From Turkey," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 68(01), pages 177-196, March.
    7. Weinzimmer, Laurence & Esken, Candace A. & Michel, Eric J. & McDowell, William C. & Mahto, Raj V., 2023. "The differential impact of strategic aggressiveness on firm performance: The role of firm size," Journal of Business Research, Elsevier, vol. 158(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Colin C. Williams, 2023. "A Modern Guide to the Informal Economy," Books, Edward Elgar Publishing, number 18668, June.
    2. Rajeev K. Goel & Ummad Mazhar & Rati Ram, 2022. "Informal competition and firm performance: Impacts on input‐ versus output performance," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(2), pages 418-430, March.
    3. Colin C. Williams & Abbi M. Kedir, 2019. "Explaining cross-country variations in the prevalence of informal sector competitors: lessons from the World Bank Enterprise Survey," International Entrepreneurship and Management Journal, Springer, vol. 15(3), pages 677-696, September.
    4. García-Lillo, Francisco & Seva-Larrosa, Pedro & Sánchez-García, Eduardo, 2023. "What is going on in entrepreneurship research? A bibliometric and SNA analysis," Journal of Business Research, Elsevier, vol. 158(C).
    5. Alexandre Oliveira & Fernando Carvalho & Nuno Rosa Reis, 2022. "Institutions and Firms’ Performance: A Bibliometric Analysis and Future Research Avenues," Publications, MDPI, vol. 10(1), pages 1-20, February.
    6. Lurdes Martins & Jorge Cerdeira & Aurora A.C. Teixeira, 2020. "Does corruption boost or harm firms’ performance in developing and emerging economies? A firm‐level study," The World Economy, Wiley Blackwell, vol. 43(8), pages 2119-2152, August.
    7. Colin C. Williams & Brunilda Kosta, 2019. "Evaluating Institutional Theories Of Informal Sector Entrepreneurship: Some Lessons From Albania," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 24(02), pages 1-17, June.
    8. Tomasi, Chiara & Le, Quoc Thai & Nguyen, Thi Ngoc Lan, 2025. "Greasing or Grinding? Regulatory context and the productivity effects of corruption: Evidence from Vietnamese SMEs," European Journal of Political Economy, Elsevier, vol. 89(C).
    9. Samuel Fosu & Albert Danso & Henry Agyei-Boapeah & Collins G. Ntim & Emmanuel Adegbite, 2020. "Credit information sharing and loan default in developing countries: the moderating effect of banking market concentration and national governance quality," Review of Quantitative Finance and Accounting, Springer, vol. 55(1), pages 55-103, July.
    10. Hailiang Zou & Yunfeng Lu & Guoyou Qi, 2023. "Does Pay Disparity within Top Management Teams Lead to Bribery Activity? The Moderation of Demographic Diversity," Sustainability, MDPI, vol. 15(4), pages 1-23, February.
    11. Santiago Acosta-Ormaechea & Atsuyoshi Morozumi, 2021. "The value-added tax and growth: design matters," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(5), pages 1211-1241, October.
    12. Ibrahim Ngouhouo & Loudi Njoya & Simplice A. Asongu, 2022. "Corruption, Economic Growth and the Informal Sector: Empirical Evidence from Developing Countries," Working Papers 22/014, European Xtramile Centre of African Studies (EXCAS).
    13. Adomako, Samuel & Amankwah-Amoah, Joseph & Tarba, Shlomo Y. & Khan, Zaheer, 2021. "Perceived corruption, business process digitization, and SMEs’ degree of internationalization in sub-Saharan Africa," Journal of Business Research, Elsevier, vol. 123(C), pages 196-207.
    14. Colin C. Williams & Ioana A. Horodnic, 2017. "Explaining participation in the undeclared economy in Central and Eastern Europe: a demand-side approach," Post-Communist Economies, Taylor & Francis Journals, vol. 29(3), pages 297-312, July.
    15. Omodero Cordelia Onyinyechi, 2019. "The Financial and Economic Implications of Underground Economy: The Nigerian Perspective," Academic Journal of Interdisciplinary Studies, Sciendo, vol. 8(2), pages 155-167, July.
    16. Chei Bukari & Emm anuel Atta Anaman, 2021. "Corruption and firm innovation: a grease or sand in the wheels of commerce? Evidence from lower-middle and upper-middle income economies," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(2), pages 267-302, June.
    17. Loudi Njoya & Ibrahim Ngouhouo & Moussa Njoupouognigni & Schneider Friederich & Zenabou Tourere, 2024. "Can we understand the simultaneous evolution between economic and informality growth in Africa? A preliminary explanation," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(1), pages 398-414, January.
    18. Choudhury, Sanchari, 2023. "Non-random selection into entrepreneurship in the realm of government decentralization and corruption," European Journal of Political Economy, Elsevier, vol. 78(C).
    19. Chen, Yiru & Li, Liying, 2025. "Government subsidies, investment efficiency, and corporate strategic aggressiveness," Finance Research Letters, Elsevier, vol. 82(C).
    20. Eijaz Ahmed Khan, 2018. "The Voice Of Informal Entrepreneurs: Resources And Capabilities Perspective," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 23(03), pages 1-19, September.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:erg:wpaper:1814. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Namees Nabeel (email available below). General contact details of provider: https://edirc.repec.org/data/erfaceg.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.