A Framework for Thinking about Enterprise Formalization Policies in Developing Countries
What policies encourage firms to become formal? The standard approach emphasizes reducing the costs of compliance with government regulation. This is unlikely to be sufficient. Instead we need to understand compliance as a function not only of firm-level costs and benefits but also in terms of the interaction between the firm and its competitors and between the firm and the state. This paper emphasizes the coordination and credibility issues involved in promoting formalization and discusses possible institutional solutions, among them business associations that make the benefits of membership dependent on compliance, information sharing arrangements among government agencies and improvements in the quality of public management.
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activities African countries bargain benefits of formalization Brazil business associations carrots coordination costs and benefits costs of compliance countries or regions Credibility developing countries Economic Management Network encourage Evasion/Competition example Exclusion/Irrelevance formal firms formal or state-sanctioned formalization decision government agencies government officials government regulation IFC survey incentive informal enterprises informal entrepreneurs informal firms informal sector information sharing intervention Interview with Vandana jua kali Kenya land titles Lower income countries Lund and Skinner Madagascar market access McKenzie Christopher Woodruff Michael Lokshin Microenterprise Moroccan Morocco Nepal non-compliant enterprises OECD percent Policy Research policy-makers potential Poverty Reduction Economic priority private sector problem process of formalization product market providing Reduction Economic Management regions e.g. registered regulatory evasion relations-based Research Working Paper Sierra Leone Small enterprises social security social security administration standards state-sanctioned institutions suppliers Suresh de Mel tax authorities tax evasion email@example.com under-declare sales upgrading USAID Vandana Chandra voluntary small World Bank Yaptenco