The Pros and Cons of Formalizing Informal MSMEs in the Palestinian Economy - Economic Research Forum (ERF)

The Pros and Cons of Formalizing Informal MSMEs in the Palestinian Economy

Topic: E2. Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy O1. Economic Development


Status:
completed Project


The study investigates the transition of firms from the informal to the formal sector. According to expert opinion, the transition of firms from the informal to the formal sector in Palestine is very limited. That being the case, the study will investigate the perceived advantages of remaining in the informal sector, which might include tax evasion and/or incompliance with the labor law, as examples. It will then examine the opportunity lost from not operating in the formal sector, including access to finance and protection of legal rights. It will also look into the costs of transitioning into the formal sector. Finally, it will briefly investigate the extent to which existing laws discourage formalization. The study offers a set of practical policy solutions that aim to encourage and assist informal enterprises to become formal.

Submitted by: The Palestinian Economic Policy Research Institute

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