DP11764 Can Enhancing the Benefits of Formalization Induce Informal Firms to Become Formal? Experimental Evidence from Benin

Author(s): Najy Benhassine, David J. McKenzie, Victor Pouliquen, Massimiliano Santini
Publication Date: January 2017
Keyword(s): Informality, Regulatory Simplification, Small Enterprises
JEL(s): D21, H25, L26, O12, O17
Programme Areas: Development Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=11764

A randomized experiment based around the introduction of the entreprenant legal status in Benin is used to test the effectiveness of supplementary efforts to enhance the presumed benefits of formalization by facilitating its links to government training programs, support to open bank accounts, and tax mediation services. Few firms register when just given information about the new regime, but the full package of supplementary efforts boosts formalization by 16.3 percentage points. Firms that are larger, and that look more like formal firms to begin with, are more likely to formalize, providing guidance for better targeting of such policies