The Impact of the Informal Sector on Firm Performance: New Evidence for MENA Firms

Hasan Murat Ertuğrul (), Ömer Tugsal Doruk and Ömer Faruk Tekdogan
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Hasan Murat ErtuÄŸrul: Anadolu University
Ömer Tugsal Doruk: Adana Alparslan Türkeş Science and Technology University
Ömer Faruk Tekdogan: University of Ankara

No 1814, Working Papers from Economic Research Forum

Abstract: This study investigates the impact of the informal sector on firm performance for over 10.000 nonfinancial firms operating in the 8 MENA countries covering 1997-2020 periods. Using a Panel Dynamic Generalized Method of Moments (GMM), we find that the effect of the informal sector on firm performance is negative. These estimates seem strong according to robustness check. We also do the analysis for SMEs and non-SMEs and find that SMEs are more sensitive to the informal sector. In terms of its findings, the study sheds new light on the MENA region by analyzing the relationship between informal economy and firm performance in a highly heterogeneous manner.

Pages: 22
Date: 2025-12-17, Revised 2025-12-17
New Economics Papers: this item is included in nep-ara, nep-cfn, nep-iue and nep-sbm
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