Barriers to Formal Entrepreneurship in Developing Countries

This paper explores new types of barriers to entrepreneurship and thus, to formal sector growth. The authors suggest that developing countries are characterized by a dual economy where a small modern industrialized sector co-exists with a large informal sector with little capital and low marginal pr...

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Main Author:	Auriol, Emmanuelle
Format:	Working Paper
Language:	en_US
Published:	World Bank, Washington, DC 2013
Subjects:	dual economy informal sector labor productivity formality administrative barriers entrepreneurship informality shadow economy market entry fees credit constraints social barriers forced mutual help social obligation coping with risk
Online Access:	http://hdl.handle.net/10986/16364

id	okr-10986-16364
recordtype	oai_dc
spelling	okr-10986-163642021-04-23T14:03:28Z Barriers to Formal Entrepreneurship in Developing Countries Auriol, Emmanuelle dual economy informal sector labor productivity formality administrative barriers entrepreneurship informality shadow economy market entry fees credit constraints social barriers forced mutual help social obligation coping with risk This paper explores new types of barriers to entrepreneurship and thus, to formal sector growth. The authors suggest that developing countries are characterized by a dual economy where a small modern industrialized sector co-exists with a large informal sector with little capital and low marginal productivity of labor. There are two main barriers to entrepreneurship in these instances: (1) administrative; and (2) social. Analysis concludes that tax reformers could widen their area of interest beyond the standard tax parameters by reducing market entry fees, while developing countries could enlarge their formal sectors and hence the tax base. Keeping firms in the informal sector exposes them to weakened property rights and hence increased risks. Taxing some sectors and not others distorts resource allocation. Eliminating such inefficiencies could provide a significant impetus to growth, and tax collection in the medium to long term. 2013-12-05T21:53:21Z 2013-12-05T21:53:21Z 2013-11-11 http://hdl.handle.net/10986/16364 en_US CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research :: Working Paper Publications & Research Africa Sub-Saharan Africa
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	en_US
topic	dual economy informal sector labor productivity formality administrative barriers entrepreneurship informality shadow economy market entry fees credit constraints social barriers forced mutual help social obligation coping with risk
spellingShingle	dual economy informal sector labor productivity formality administrative barriers entrepreneurship informality shadow economy market entry fees credit constraints social barriers forced mutual help social obligation coping with risk Auriol, Emmanuelle Barriers to Formal Entrepreneurship in Developing Countries
geographic_facet	Africa Sub-Saharan Africa
description	This paper explores new types of barriers to entrepreneurship and thus, to formal sector growth. The authors suggest that developing countries are characterized by a dual economy where a small modern industrialized sector co-exists with a large informal sector with little capital and low marginal productivity of labor. There are two main barriers to entrepreneurship in these instances: (1) administrative; and (2) social. Analysis concludes that tax reformers could widen their area of interest beyond the standard tax parameters by reducing market entry fees, while developing countries could enlarge their formal sectors and hence the tax base. Keeping firms in the informal sector exposes them to weakened property rights and hence increased risks. Taxing some sectors and not others distorts resource allocation. Eliminating such inefficiencies could provide a significant impetus to growth, and tax collection in the medium to long term.
format	Publications & Research :: Working Paper
author	Auriol, Emmanuelle
author_facet	Auriol, Emmanuelle
author_sort	Auriol, Emmanuelle
title	Barriers to Formal Entrepreneurship in Developing Countries
title_short	Barriers to Formal Entrepreneurship in Developing Countries
title_full	Barriers to Formal Entrepreneurship in Developing Countries
title_fullStr	Barriers to Formal Entrepreneurship in Developing Countries
title_full_unstemmed	Barriers to Formal Entrepreneurship in Developing Countries
title_sort	barriers to formal entrepreneurship in developing countries
publisher	World Bank, Washington, DC
publishDate	2013
url	http://hdl.handle.net/10986/16364
_version_	1764432979914915840

Barriers to Formal Entrepreneurship in Developing Countries

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