Casting a shadow: Productivity of formal firms and informality

Abstract

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.

Unlocking Sustainable Private Sector Growth in the Middle East and North Africa

“…This share is substantially higher than in ECA countries, where the percentage drops by almost one-third (22% in total). This feature can have severe implications for companies' overall competitiveness, as shown by a number of studies documenting the negative effect of informality on output (Rozo and Winkler, 2021), employment (Amin, 2021), productivity (Amin and Okou, 2020), innovation (Avenyo et al, 2021) and access to finance (Distinguin et al, 2016) of formal firms. This seems to be the case for firms in MEnA.…”

Information technology adoption and integration into global value chains: Evidence from small‐ and medium‐sized enterprises in Vietnam

“…While GVCs exist and operate mainly in the formal sector, the majority of SMEs in developing countries are informal (Bruhn & McKenzie, 2014; Cusolito et al, 2016; de Andrade et al, 2015). High levels of informality affect growth and productivity of a firm (Amin & Okou, 2020) and restrain its engagement in GVCs (Nathan, 2019). Informality can hinder efficiencies in the production process as informal firms may choose to limit their growth to avoid detection (Farazi, 2014) and tend to use less advanced production technologies (Perry et al, 2007).…”

Factors and remedies for productivity and efficiency among small‐scale informal enterprises: A theoretical perspective

“…The central question of this paper is formulated on how a combined theoretical approach on the characteristics and location of firms could enhance knowledge on the hindering and promoting factors of productivity and efficiency among informal enterprises. The characteristics of a firm, including size (Boring 2019;Clancy and Roman 2014), structure (Carillo and Kopelman 1991;Ogbo et al 2015), and formality (Amin et al 2019;Echevin and Murtin 2009) of operations, have been significantly associated with productivity. The productivity and efficiency effects of informal firms' location, whether in close proximity or isolated from closely related firms, is however not well established in the literature.…”