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Is there demand for formality among informal firms? Evidence from microfirms in downtown Lima

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Abstract

A través de datos experimentales obtenidos de microempresas en el Cercado de Lima, este estudio analiza la demanda de formalización, es decir, de obtener una licencia de funcionamiento. Los hallazgos del estudio son paradójicos: la mayoría de empresas reporta más desventajas que ventajas de ser informales pero cuando se les anima a obtener una licencia, solo una de cuatro empresas acepta el incentivo. Así, para algunas empresas la formalización puede ser no deseable a cualquier costo, lo que puede estar asociado a los costos recurrentes de la formalización, el bajo valor de los beneficios de la formalización que se percibe y las perspectivas de crecimiento limitado de estas empresas. Una implicación adicional es que el autoreporte sobre la disposición a formalizar o sobre las razones por que no formalizar son poco fiables.

Suggested Citation

  • Miguel Jaramillo, 2013. "Is there demand for formality among informal firms? Evidence from microfirms in downtown Lima," Avances de Investigación 0013, Grupo de Análisis para el Desarrollo (GRADE).
    • Handle: RePEc:gad:avance:0013
    Note: Avances de Investigación, 13
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    Citations

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    Cited by:

    1. 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.
    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. Antonio Báez-Morales, 2015. "“Differences in efficiency between Formal and Informal Micro Firms in Mexico”," IREA Working Papers 201516, University of Barcelona, Research Institute of Applied Economics, revised Jun 2015.
    4. Vera, Celia & Rendon, Silvio, 2021. "Is the Global Competitiveness Index a Reliable Tool for the Design of Labor Market Policies? Evidence from Peru," IZA Policy Papers 180, Institute of Labor Economics (IZA).
    5. Joshi, Anuradha & Prichard, Wilson & Heady, Christopher, 2014. "Taxing the Informal Economy: The Current State of Knowledge and Agendas for Future Research," Working Papers 13663, Institute of Development Studies, International Centre for Tax and Development.
    6. Gustavo Henrique de Andrade & Miriam Bruhn & David McKenzie, 2016. "A Helping Hand or the Long Arm of the Law? Experimental Evidence on What Governments Can Do to Formalize Firms," The World Bank Economic Review, World Bank, vol. 30(1), pages 24-54.
    7. Floridi, A. & Demena, B.A. & Wagner, N., 2019. "Shedding light on the shadows of informality," ISS Working Papers - General Series 642, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    8. Amadou Boly, 2015. "On the benefits of formalization: Panel evidence from Vietnam," WIDER Working Paper Series 038, World Institute for Development Economic Research (UNU-WIDER).
    9. Madrigal, Lucia & Pagés, Carmen & Suaya, Agustina, 2016. "The Value of Social Security: Are Formal Jobs Better?," IZA Discussion Papers 9866, Institute of Labor Economics (IZA).
    10. Bruhn, Miriam, 2013. "A tale of two species: Revisiting the effect of registration reform on informal business owners in Mexico," Journal of Development Economics, Elsevier, vol. 103(C), pages 275-283.
    11. Farazi, Subika, 2014. "Informal firms and financial inclusion : status and determinants," Policy Research Working Paper Series 6778, The World Bank.
    12. Bruhn, Miriam & McKenzie, David, 2013. "Using administrative data to evaluate municipal reforms : an evaluation of the impact of Minas Facil Expresso," Policy Research Working Paper Series 6368, The World Bank.
    13. Subika Farazi, 2014. "Informal Firms and Financial Inclusion: Status and Determinants," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 5(03), pages 1-28.
    14. Francisco B. Galarza & Fernando Requejo, 2019. "Reducing Informality Using Two-Sided Incentives: Theory and Experiment," Working Papers 149, Peruvian Economic Association.
    15. Amadou Boly, 2015. "On the effects of formalization on taxes and wages: Panel evidence from Vietnam," WIDER Working Paper Series 042, World Institute for Development Economic Research (UNU-WIDER).
    16. Campos,Francisco Moraes Leitao & Goldstein,Markus P. & Mckenzie,David J. & Campos,Francisco Moraes Leitao & Goldstein,Markus P. & Mckenzie,David J., 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.

    More about this item

    Keywords

    Pequeñas empresas; Small enterprises; Firm behaviour; Informality; Demand for formality; Peru;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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