Formal registration and informal firms in Cambodia

Kiyoyasu Tanaka

No 807, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: This paper estimates the impact of formal registration on firm-level performance. I construct a unique panel dataset on both formally registered and unregistered establishments in Cambodia for 2011 and 2014. The sample includes 8,350 informal firms in 2011, of which 216 firms obtained a formal registration in 2014. To mitigate selection bias, I employ a difference-in-differences method combined with propensity-score matching and a propensity-score-weighted regression method.My results show a significantly positive impact of formalization on sales and value added, but little significant effect on labor productivity. Formalization increases non-wage expenditures significantly, consistent with the hypothesis that formalized firms increase their purchases from other formal firms to benefit from Cambodia’s value added tax system.

Keywords: Informal sector; formalization; registration; Cambodia (search for similar items in EconPapers)
JEL-codes: D22 O12 O17 (search for similar items in EconPapers)
Date: 2021-02
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 807. 2021-02

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https://ir.ide.go.jp/record/52014/files/IDP000807_001.pdf First version, 2021 (application/pdf)

Related works:
Journal Article: Formal Registration and Informal Firms in Cambodia (2023)
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