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

Formalizing firms can potentially increase the tax base, expand safety and social protections for workers, create good jobs, and grow the economy. However, the costs and processes of formality may be too challenging for firms, particularly the smal...

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Main Authors:	Krafft, Caroline, Assaad, Ragui, Rahman, Khandker Wahedur, Cumanzala, Maakwe
Format:	Working Paper
Language:	English
Published:	World Bank, Washington, DC 2020
Subjects:	FIRMS FORMALITY INFORMALITY MICROENTERPRISES SMALL AND MEDIUM SIZE ENTERPRISE
Online Access:	http://documents.worldbank.org/curated/en/324411601923707684/How-Do-Small-Formal-and-Informal-Firms-in-the-Arab-Republic-of-Egypt-Compare http://hdl.handle.net/10986/34594

id	okr-10986-34594
recordtype	oai_dc
spelling	okr-10986-345942022-09-20T00:11:36Z How Do Small Formal and Informal Firms in the Arab Republic of Egypt Compare? Krafft, Caroline Assaad, Ragui Rahman, Khandker Wahedur Cumanzala, Maakwe FIRMS FORMALITY INFORMALITY MICROENTERPRISES SMALL AND MEDIUM SIZE ENTERPRISE Formalizing firms can potentially increase the tax base, expand safety and social protections for workers, create good jobs, and grow the economy. However, the costs and processes of formality may be too challenging for firms, particularly the smallest firms, to bear. Thus, informal firms may not be able to survive the transition to formality and attempts to expand formality may be harmful and counterproductive to job creation and growth. This paper investigates the potential for currently informal firms to formalize in the Arab Republic of Egypt. The paper compares the characteristics and dynamics of micro and small non-agricultural firms by formality and identifies the extent of overlap and potential for formalization. The analysis finds that, beyond firm size, the basic and easily observable characteristics of firms are not closely linked to formality. Firm age, productivity, and owner characteristics such as education are strongly predictive of formality. There is some overlap in the predicted probability of formality between formal and informal firms, suggesting some potential for formalization. The paper develops profiles (groups and clusters) of similar firms to identify those with a higher potential for formalization. In terms of dynamics, new firms tend to be informal and informal firms are more likely to exit (close), but conditional on firm survival, employment growth is similar across formal and informal firms. 2020-10-08T14:07:50Z 2020-10-08T14:07:50Z 2020-10 Working Paper http://documents.worldbank.org/curated/en/324411601923707684/How-Do-Small-Formal-and-Informal-Firms-in-the-Arab-Republic-of-Egypt-Compare http://hdl.handle.net/10986/34594 English Policy Research Working Paper;No. 9423 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Middle East and North Africa Egypt, Arab Republic of
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	FIRMS FORMALITY INFORMALITY MICROENTERPRISES SMALL AND MEDIUM SIZE ENTERPRISE
spellingShingle	FIRMS FORMALITY INFORMALITY MICROENTERPRISES SMALL AND MEDIUM SIZE ENTERPRISE Krafft, Caroline Assaad, Ragui Rahman, Khandker Wahedur Cumanzala, Maakwe How Do Small Formal and Informal Firms in the Arab Republic of Egypt Compare?
geographic_facet	Middle East and North Africa Egypt, Arab Republic of
relation	Policy Research Working Paper;No. 9423
description	Formalizing firms can potentially increase the tax base, expand safety and social protections for workers, create good jobs, and grow the economy. However, the costs and processes of formality may be too challenging for firms, particularly the smallest firms, to bear. Thus, informal firms may not be able to survive the transition to formality and attempts to expand formality may be harmful and counterproductive to job creation and growth. This paper investigates the potential for currently informal firms to formalize in the Arab Republic of Egypt. The paper compares the characteristics and dynamics of micro and small non-agricultural firms by formality and identifies the extent of overlap and potential for formalization. The analysis finds that, beyond firm size, the basic and easily observable characteristics of firms are not closely linked to formality. Firm age, productivity, and owner characteristics such as education are strongly predictive of formality. There is some overlap in the predicted probability of formality between formal and informal firms, suggesting some potential for formalization. The paper develops profiles (groups and clusters) of similar firms to identify those with a higher potential for formalization. In terms of dynamics, new firms tend to be informal and informal firms are more likely to exit (close), but conditional on firm survival, employment growth is similar across formal and informal firms.
format	Working Paper
author	Krafft, Caroline Assaad, Ragui Rahman, Khandker Wahedur Cumanzala, Maakwe
author_facet	Krafft, Caroline Assaad, Ragui Rahman, Khandker Wahedur Cumanzala, Maakwe
author_sort	Krafft, Caroline
title	How Do Small Formal and Informal Firms in the Arab Republic of Egypt Compare?
title_short	How Do Small Formal and Informal Firms in the Arab Republic of Egypt Compare?
title_full	How Do Small Formal and Informal Firms in the Arab Republic of Egypt Compare?
title_fullStr	How Do Small Formal and Informal Firms in the Arab Republic of Egypt Compare?
title_full_unstemmed	How Do Small Formal and Informal Firms in the Arab Republic of Egypt Compare?
title_sort	how do small formal and informal firms in the arab republic of egypt compare?
publisher	World Bank, Washington, DC
publishDate	2020
url	http://documents.worldbank.org/curated/en/324411601923707684/How-Do-Small-Formal-and-Informal-Firms-in-the-Arab-Republic-of-Egypt-Compare http://hdl.handle.net/10986/34594
_version_	1764481236551598080

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

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