A study of Egyptian and Palestine trans-formal firms – A neglected category operating in the borderland between formality and informality

This article outlines a new approach to firm behaviour different from both ‘dichotomist’ and ‘continuum’ formal/informal models. The approach adopts a new heuristic based on the notion of a borderland as space of interaction between dimensions of formality, and creates an umbrella category of trans-formal firms, which are neither purely formal nor informal. Three formality dimensions are adopted: (i) registration of the firm, (ii) existence of a bank account in the name of the firm, and the (iii) presence of an official balance sheet. After elucidating the new approach theoretically, the paper assesses the analytical capacity of the approach with quantitative and qualitative information representing 16 Egyptian and 16 Palestinian firms. The majority of the considered firms are found to be trans-formal moving in a space of decision-making representing our new, broadened notion of borderland showing that policies aiming at formalization processes misrepresent the realities of significant numbers of firms.