Do Informal Firms Want to Formalize and Does It Help Them If They Do?
Most firms in developing countries are informal. Does it make sense for them to formalize? Hernando de Soto has famously argued that informal firms would like to be formal, only that burden some entry barriers prevent them. The result, spurred by t...
| Main Authors: | , , |
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| Format: | Brief |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2012/03/16240749/informal-firms-want-formalize-help http://hdl.handle.net/10986/10053 |
| Summary: | Most firms in developing countries are
informal. Does it make sense for them to formalize? Hernando
de Soto has famously argued that informal firms would like
to be formal, only that burden some entry barriers prevent
them. The result, spurred by the efforts of doing business
and investment climate reform efforts has been efforts
around the world to streamline the entry process. However, a
countervailing view of informality views informal firm
owners as rationally weighing up the costs and benefits of
formalizing, and rationally choosing only to become formal
when they grow large enough to benefit from the formal
institutions of society. In this view, smaller, less
productive firms don't see any gain to formalizing, so
choose not to. |
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