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Formalizing employment in Africa's small firms: Experimental evidence from Côte D'Ivoire

Author

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  • Fietz, Katharina
  • Lakemann, Tabea
  • Beber, Bernd
  • Priebe, Jan
  • Lay, Jann

Abstract

Informal, low-quality employment in micro, small, and medium enterprises (MSMEs) remains a significant challenge in low- and middle-income countries. We present evidence from an impact evaluation of a light-touch business consulting program with a focus on employment formalization in Côte d'Ivoire. Using a randomized controlled trial with 448 MSMEs and a unique employer-employee dataset, we find that the intervention led to employment formalization, driven by greater reported minimum wage compliance and an increase in written contract provision. We show suggestive evidence that these improvements were driven by selective formalization and increased awareness of regulation. The intervention's financial implications were moderate, with findings indicating that firms partially formalized previously informal payment streams, without a significant increase in total labor costs.

Suggested Citation

  • Fietz, Katharina & Lakemann, Tabea & Beber, Bernd & Priebe, Jan & Lay, Jann, 2025. "Formalizing employment in Africa's small firms: Experimental evidence from Côte D'Ivoire," Ruhr Economic Papers 1149, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    • Handle: RePEc:zbw:rwirep:315486
    DOI: 10.4419/96973332
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    More about this item

    Keywords

    Employment formalization; business consulting; micro; small and medium enterprises(MSMEs); randomized controlled trial (RCT); Côte d'Ivoire;
    All these keywords.

    JEL classification:

    • 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
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions

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