Informality, Size, and Regulation: Theory and an Application to Egypt

Marcelo Giugale and Sherif El-Diwany

Center for Agricultural and Rural Development (CARD) Publications from Center for Agricultural and Rural Development (CARD) at Iowa State University

Abstract: The paper shows how, when the enforceability of regulations is size-sensitive, price competition can lock firms into informality and, thus, smallness, depending on the form of the production function. In that context, exogenous "help" packages targeted to informal firms "promote" micro and small enterprises (i.e., increase their numbers) but do not "develop" them (i.e., foster their growth). The "help" only generates a short-term span of abnormal profits for existing informal firms, and a long-term income transfer toward informal-market consumers. The model is tested in the context of Egypt's micro and small enterprise sector.

Keywords: Informality; Size; Regulation; Egypt; Hide-outs. (search for similar items in EconPapers)
JEL-codes: L11 L51 O17 (search for similar items in EconPapers)
Date: 1997-12
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ias:cpaper:97-wp185

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