Informal Entrepreneurship: Institutional Drivers and Productivity Consequences

Erkko Autio, Kun Fu, Donghyun Park and Shu Tian
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Erkko Autio: Imperial College London
Kun Fu: Loughborough University London
Donghyun Park: Asian Development Bank
Shu Tian: Asian Development Bank

No 808, ADB Economics Working Paper Series from Asian Development Bank

Abstract: Using Global Entrepreneurship Monitor and World Bank data, we produce a novel estimation for the prevalence of informal entrepreneurship in 60 countries in the period 2006– 2022. Using a real option framework, we test the effect of business regulation, property rights protection, and the rule of law on formal and informal entrepreneurship prevalence. Finally, we test the influence of a country’s informal entrepreneurship rate on entrepreneurial growth aspirations by individuals. We find that burdensome business regulations increase informal entry relative to formal entry. We also find that stronger property rights and rule of law encourage formal entrepreneurship and discourage informal entrepreneurship. Further, the analysis finds that a high rate of informal entrepreneurship discourages entrepreneurs’ growth aspirations and negatively moderates the relationship between the entrepreneur’s gender and growth aspirations.

Keywords: informal entrepreneurship; institutions; business regulation; rule of law; property rights; entrepreneurial growth aspirations; multilevel (search for similar items in EconPapers)
JEL-codes: E26 L26 O43 (search for similar items in EconPapers)
Pages: 57
Date: 2025-10-06
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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:021669

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