How Do Small Formal and Informal Firms in the Arab Republic of Egypt Compare?

Krafft, Caroline ; Assaad, Ragui ; Rahman, Khandker Wahedur ; Cumanzala, Maakwe

World Bank, Washington, DC

关键词: FIRMS;    FORMALITY;    INFORMALITY;    MICROENTERPRISES;    SMALL AND MEDIUM SIZE ENTERPRISE;   

DOI  :  10.1596/1813-9450-9423
RP-ID  :  WPS9423

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Formalizing firms can potentiallyincrease the tax base, expand safety and social protectionsfor workers, create good jobs, and grow the economy.However, the costs and processes of formality may be toochallenging for firms, particularly the smallest firms, tobear. Thus, informal firms may not be able to survive thetransition to formality and attempts to expand formality maybe harmful and counterproductive to job creation and growth.This paper investigates the potential for currently informalfirms to formalize in the Arab Republic of Egypt. The papercompares the characteristics and dynamics of micro and smallnon-agricultural firms by formality and identifies theextent of overlap and potential for formalization. Theanalysis finds that, beyond firm size, the basic and easilyobservable characteristics of firms are not closely linkedto formality. Firm age, productivity, and ownercharacteristics such as education are strongly predictive offormality. There is some overlap in the predictedprobability of formality between formal and informal firms,suggesting some potential for formalization. The paperdevelops profiles (groups and clusters) of similar firms toidentify those with a higher potential for formalization. Interms of dynamics, new firms tend to be informal andinformal firms are more likely to exit (close), butconditional on firm survival, employment growth is similaracross formal and informal firms.