Working Papers
Household Enterprises: The Impact of Formality on Productivity and Profits
No.
1452
Publisher
ERF
Date
December, 2020
Topic
L2. Firm Objectives, Organization, and Behavior
D2. Production and Organizations
O1. Economic Development
In this paper, we assess the impact of commercial registration of household enterprises on their labor productivity and profits. Based on the 2012 and 2018 rounds of the Egyptian Labor Market Panel Surveys, we employ an instrumental variable strategy and find a positive effect of formal registration on profit and a much higher positive effect on labor productivity. The main channels are higher capital intensity and assets. In addition to the owner’s gender and education level, labor productivity varies mainly with firms’ assets and shared ownership, while profits are mostly determined by the age of the firm and that of its owner. We also find that the positive effect of formality on performance holds for a select category of owners and firms. Finally, our analysis allows us to identify different policy intervention tools for household firms according to their productivity levels and their distance to a threshold of formality fixed costs.
Research Associates
Nesma Ali
Economist, Enterprise Analysis Unit, The World Bank...
Research Fellows
Mohamed Ali Marouani
Associate Professor, Université Paris1-Panthéon-Sorbonne