Entry Regulation and the Formalization of Microenterprises in Developing Countries

By Miriam Bruhn, David J. McKenzie. 2013

237 citations recorded by the source corpus.

The majority of microenterprises in most developing countries remain informal despite more than a decade of reforms aimed at making it easier and cheaper for them to formalize. This paper summarizes the evidence on the effects of entry reforms and related policy actions to promote firm formalization. Most of these policies result only in a modest increase in the number of formal firms, if at all. Less is known about the impact of other forms of business regulations on the performance of low-scale enterprises. Most informal firms appear not to benefit on net from formalizing, so ease of formalization alone will not lead to most of them formalizing. Increased enforcement of rules can increase formality. Although there is a fiscal benefit of doing this with larger informal firms, it is unclear whether there is a public rationale for trying to formalize subsistence enterprises.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/e3d7e6b03704278e2d6bf3bc77c2284070cfd74f

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In Economics and Econometrics

1. M. Shahid
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Citations in the corpus

• Export Markets and Labor Allocation in a Low-Income Country (2018, unknown): “9 See also Verhoogen (2008), Bustos (2011a, b), and Brambilla, Lederman, and Porto (2012) for the effects of exporting on firm technology, quality or skill upgrading in formal enterprises and Brambilla, Porto, and Tarozzi (2012) on the effects of exporting on microenterprises in aquaculture.”
• Informal entrepreneurship and institutional theory: explaining the varying degrees of (in)formalization of entrepreneurs in Pakistan (2016, background): “Others, however, show that simplifying registration does not always lead to formalization (Bruhn and McKenzie 2013). The World Bank Doing Business survey (2013) ranks Pakistan 98th out of 185 economies in terms of its ‘ease of starting a business’ with a Pakistani entrepreneur having to complete 11 ”
• Informality: Causes and Consequences for Development (2020, background): “Indeed, substantial efforts have been made to reduce registration costs around the world, but the results of these reforms have been quite limited in terms of inducing firms to formalise (Bruhn & McKenzie 2014).”
• Determinants of the Level of Informality of Informal Micro-Enterprises: Some Evidence from the City of Lahore, Pakistan (2016, background): “…display varying levels of informality in that they conform to the formal rules and regulations in some regards but not others (Andrade et al 2013; Bruhn & McKenzie 2013; Kanbur 2009; Ram et al 2002a,b; Small Business Council 2004; Verreyne et al 2014; de Villiers Scheepers et al 2014; Williams…”
• Do Interventions Targeted at Micro-Entrepreneurs and Small and Medium-Sized Firms Create Jobs? A Systematic Review of the Evidence for Low and Middle Income Countries (2014, background): “Bruhn and McKenzie (2013) review the rigorous evidence on entry regulation and formalization of microenterprises.”