Informal Competition, Firms’ Productivity and Policy Reforms in Egypt - Economic Research Forum (ERF)

Informal Competition, Firms’ Productivity and Policy Reforms in Egypt

Nesma Ali and Boris Najman

July, 2016


36 pages

L2. Firm Objectives, Organization, and Behavior
D2. Production and Organizations
O1. Economic Development

This paper investigates the effect of the competition stemmed from informal firms on formal firms’ productivity in Egypt. Using the World Bank’s Enterprise Surveys, we update the two-step methodology of Guiso et al. (2004) to build a regional indicator of informal competition intensity. Our estimation reports a positive effect of this indicator on formal firms’ productivity that remains valid to the instrumental variable approach and to multiple robustness check. This result is subject to factors accounting for the characteristics of the firm and is segmented by formal firms’ size. We also identify informal firms’ cost advantage as the main channel through which this effect occurs. Our results call on the importance of tax reforms and effective regulation to be implemented in Egypt.


تبحث هذه الورقة تأثير المنافسة النابع من الشركات غير الرسمية على إنتاجية الشركات الرسمية في مصر. باستخدام مسوحات البنك الدولي عن المؤسسات، نقوم بتحديث منهجية جويسو وآخرون. (2004) لبناء مؤشر إقليمي لشدة المنافسة الرسمية. تقديرنا أن هناك تأثير إيجابي لهذا المؤشر على إنتاجية الشركات الرسمية التي لا تزال صالحة للنهج متغير أساسي ومتانة الاختيار المتعددة. هذه النتيجة تخضع لعوامل المحاسبة لخصائص الشركة ومجزأة حسب حجم الشركات الرسمية. نقوم أيضا بتحديد ميزة التكلفة للشركات غير رسمية كقناة رئيسية من خلالها يحدث هذا التأثير. تدعو نتائجنا الى أهمية الإصلاحات الضريبية والتنظيم الفعال لتنفيذها في مصر

Research Associates

Nesma Ali

Post-Doctoral Researcher at Düsseldorf Institute for Competition Economics, Heinrich-Heine University Düsseldorf


Boris Najman

University Paris East Créteil (UPEC)/ Department of Economics



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