The Demand for, and Consequences of, Formalization among Informal Firms in Sri Lanka

Suresh de Mel, David McKenzie and Christopher Woodruff

American Economic Journal: Applied Economics, 2013, vol. 5, issue 2, 122-50

Abstract: A field experiment in Sri Lanka provides informal firms incentives to formalize. Information about the registration process and reimbursement of direct costs does not increase registration. Payments equivalent to one-half to one month (alternatively, two months) of the median firm's profits leads to registration of around one-fifth (alternatively, one-half ) of firms. Land ownership issues are the most common reason for not registering. Follow-up surveys 15 to 31 months later show higher mean profits, but largely in a few firms that grew rapidly. We find little evidence for other changes in behavior, but formalized firms express more trust in the state. (JEL C93, D22, L25, L26, O14)

JEL-codes: C93 D22 L25 L26 O14 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/app.5.2.122
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Citations: View citations in EconPapers (125)

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Related works:
Working Paper: The Demand for, and Consequences of, Formalization among Informal Firms in Sri Lanka (2012)
Working Paper: The demand for, and consequences of, formalization among informal firms in Sri Lanka (2012)
Working Paper: The demand for, and consequences of, formalization among informal firms in Sri Lanka (2012)
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