Year: 2011
Type: report
Abstract: We examine the productivity of informal firms (those that are not registered with the government) in 24 African countries using field work and World Bank firm level data.We find that productivity jumps sharply if we compare small formal firms to informal firms, and rises rapidly with the size of formal firms.Critically, informal firms appear to be qualitatively different than formal firms: they are smaller in size, produce to order, are run by managers with low human capital, do not have access to external finance, do not advertise their products, and sell to largely informal clients for cash.Informal firms thus occupy a very different market niche than formal firms do, and rarely become formal because there is very little demand for their products from the formal sector.
DOI: 10.3386/w16821
Authors: Rafael La Porta, Andrei Shleifer
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1825816656