The informal sector accounts for a major share of African economies' GDP, employment and firms. Most national surveys of the sector focus on informal employment rather than the structure of informal businesses, with sample designs oriented to small scale individual or household firms. Here, firm‐level data are used, collected on 900 formal and informal businesses in the capitals of Benin, Burkina Faso and Senegal. Data from these surveys, complemented by semi‐structured interviews of major stakeholders in the three cities as well as data from national accounts, document huge enforcement problems, leading to the emergence of large informal actors coexisting with smaller informal businesses. While there is a significant difference in productivity between formal and informal firms, the productivity gap is much smaller for large informal firms than for small informal firms, suggesting that large informal firms have the pre‐requisites to formalize but choose not to do so.
The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
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