This was a Research project examining the demand for formality
among informal unregistered businesses. A baseline and three follow-up surveys of over 500
informal enterprises in Colombo and Kandy districts were carried out in this
survey. KCG also supervised the administering of registration information
treatment and cash treatment to randomly selected enterprises.
RESEARCH PUBLICATIONS
“The
Demand for, and Consequences of, Formalization among Informal Firms in Sri
Lanka”
A field
experiment in Sri Lanka provides informal firms incentives to formalize.
Information about the registration process and reimbursement of direct costs
does not increase registration. Payments equivalent to one-half to one month (alternatively,
two months) of the median firm’s profits leads to
registration of around one-fifth (alternatively,
one-half ) of firms. Land ownership issues are the
most common reason for not registering. Follow-up surveys 15 to 31 months later
show higher mean profits, but largely in a few firms that grew rapidly. We find
little evidence for other changes in behavior, but formalized firms express
more trust in the state.
Published in American Economic Journal: Applied Economics
Vol. 5, No. 2, 2013, pp. 122-150. See: http://www.aeaweb.org/articles.php?doi=10.1257/app.5.2
A previous
version of the paper is available as (1) NBER Working Paper No. 18019, April
2012 (downloadable from http://www.nber.org/papers/w18019 ) and (2) IZA Discussion Paper No 6442, March
2012 (downloadable from: http://www.iza.org/ (direct link: http://ftp.iza.org/dp6442.pdf)
and (3) World Bank Policy Research Working Paper No. 5991, March 2012
(downloadable from http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2012/03/12/000158349_20120312094118/Rendered/PDF/WPS5991.pdf).