Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/202833 
Year of Publication: 
2019
Series/Report no.: 
IZA Discussion Papers No. 12487
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Labor markets in low- and middle income countries are characterized by high levels of informality. A multitude of interventions have therefore been implemented in many countries with the objective to increase the formalization of firms and workers, including information campaigns, simplification of registration procedures, reductions of payroll taxes and social security contributions, and interventions that enforce labor or business formalization. In this paper, we compile a database of 157 impact estimates from 32 academic studies that evaluate empirically one or more of these formalization interventions. The empirical analysis correlates the impact estimates of the primary studies — given as either (i) a measure of sign and statistical significance or (ii) the effect size — with explanatory factors such as the intervention type, the outcome variable, the scope of the intervention (program or policy), and other covariates. Several key findings emerge: first, the intervention type is not a strong determinant for the effectiveness of formalization interventions, though tax incentives and labor inspection are most likely to display significant positive effects. Second, the outcome "worker registration" shows significantly better results than other outcomes. Third, interventions at scale — i.e. formalization "policies" — are more effective on average than singular "programs".
Subjects: 
formalization
labor registration
business registration
impact evaluation
JEL: 
C40
J08
J46
J48
Document Type: 
Working Paper

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