The costs and benefits of formalization for firms: A mixed-methods study on Mozambique
Research output: Contribution to conference › Paper › Research
This paper is the first to use a panel dataset from the African continent to investigate the relationship between formalization and firm outcomes.
Instead of applying a binary formality indicator, it constructs a conceptual framework that regards informality as a continuum consisting of four degrees. The quantitative data includes 516 manufacturing enterprises which are analysed through a matched double difference approach. Moreover, the study explores participant observation as well as semi-structured interviews with government officials, experts, and entrepreneurs to explain the quantitative results and to examine additional effects of formalization.
It suggests that the most informal firms do not benefit from formalization due to their underlying conditions. Other, more formal enterprises benefit but there is scope for increasing the benefits and decreasing the costs of formalization. Further, an improvement of the costs and benefits is not enough: better institutions are needed.
Instead of applying a binary formality indicator, it constructs a conceptual framework that regards informality as a continuum consisting of four degrees. The quantitative data includes 516 manufacturing enterprises which are analysed through a matched double difference approach. Moreover, the study explores participant observation as well as semi-structured interviews with government officials, experts, and entrepreneurs to explain the quantitative results and to examine additional effects of formalization.
It suggests that the most informal firms do not benefit from formalization due to their underlying conditions. Other, more formal enterprises benefit but there is scope for increasing the benefits and decreasing the costs of formalization. Further, an improvement of the costs and benefits is not enough: better institutions are needed.
Original language | English |
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Publication date | Dec 2018 |
Number of pages | 26 |
DOIs | |
Publication status | Published - Dec 2018 |
- Faculty of Social Sciences - Firms, informality, Mozambique
Research areas
Links
- https://www.wider.unu.edu/sites/default/files/Publications/Working-paper/PDF/wp2018-159.pdf
Final published version
ID: 224897721