On the Short- and Medium-Term Effects of Formalisation: Panel Evidence from Vietnam

Amadou Boly

Journal of Development Studies, 2018, vol. 54, issue 4, 641-656

Abstract: This paper analyses the consequences of formalisation on the performance of informal firms, using a panel dataset from Vietnam. We find that switching firms (before switching) have higher profit and value added compared to non-switching firms; suggesting heterogeneity. Becoming formal leads to an additional increase in switching firms’ profit and value added. The benefits of formalisation materialise in the short-term (one year) and persist in the longer-term (three or more years). These benefits run through various channels such as better access to powered equipment or higher business association membership; but not better access to credit.

Date: 2018
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DOI: 10.1080/00220388.2017.1342817

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