Can Enhancing the Benefits of Formalization Induce Informal Firms to Become Formal? Experimental Evidence from Benin

Benhassine, Najy ; McKenzie, David ; Pouliquen, Victor ; Santini, Massimiliano

World Bank, Washington, DC

关键词: informality;    small and medium-sized enterprises;    small enterprises;    regulatory simplification;    regulatory reform;   

DOI  :  10.1596/1813-9450-7900
RP-ID  :  WPS7900

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Governments around the world haveintroduced reforms to attempt to make it easier for informalfirms to formalize. However, most informal firms have notgone on to become formal, especially when tax registrationis involved. A randomized experiment based around theintroduction of the entreprenant legal status in Benin isused to provide evidence from an African context on thewillingness of informal firms to register after introducinga simple, free registration process, and to test theeffectiveness of supplementary efforts to enhance thepresumed benefits of formalization by facilitating its linksto government training programs, support to open bankaccounts, and tax mediation services. Few firms registerwhen just given information about the new regime, but 9.6percentage points more register when they were visited inperson and the benefits were explained. The full package ofsupplementary efforts boosts the impact on the formalizationrate to 16.3 percentage points, demonstrating that enhancingthe benefits of formalization does induce more firms toformalize. Firms that are larger, and that look more likeformal firms to begin with, are more likely to formalize,providing guidance for better targeting of such policies.However, formalization appears to offer limited benefits tothe firms, and the costs of personalized assistance arehigh, suggesting that such enhanced formalization effortsare unlikely to pass cost-benefit tests.