The bright side of formalization policies!
Meta-analysis of the benefits of policy-induced versus self-induced formalization
This paper provides a meta-analysis of the impact of business formalization on performance. We exploit a meta-dataset of 1,271 estimates derived from 20 studies available until October 2019. The analysis reveals that formalization is associated with fairly small benefits that take time to materialize. We then exploited the difference between policy-induced formalization and self-induced formalization investigating underlying effects, publication bias, and sources of heterogeneity. Policy-induced formalization brings large benefits, whereas self-induced formalization only results in medium benefits, suggesting that indeed formalization can be spurred by adequate policy actions. To be most effective, formalization policies should be implemented with information sessions, trainings/workshops, and business development services to unleash the growth potential of newly formalized firms in the most potent way.
|Policy induced formalization, self-induced formalization, informal economy, firm performance, meta-analysis|
|Econometric and Statistical Methods: Special Topics: Other (jel C49), Firm Behavior (jel D21), Positive Analysis of Policy-Making and Implementation (jel D78), Microeconomic Analyses of Economic Development (jel O12), Formal and Informal Sectors; Shadow Economy; Institutional Arrangements: Legal, Social, Economic, and Political (jel O17)|
|Applied Economics Letters|
|Organisation||International Institute of Social Studies of Erasmus University (ISS)|
Floridi, A, Demena, B.A, & Wagner, N. (2021). The bright side of formalization policies!. Applied Economics Letters. doi:10.1080/13504851.2020.1870919