2012年-世界发展银行全球_The_Demand_for_and_Consequences_of_Formalization_among_Informal_Firms_in_Sri_Lanka_37页_1mb

Summary of "The Demand for, and Consequences of, Formalization among Informal Firms in Sri Lanka"

Core Content

This paper presents an impact evaluation study conducted in Sri Lanka to understand the demand for formalization among informal firms and the consequences of formalizing. The authors designed a field experiment to provide incentives for informal firms to register with the Divisional Secretariat (DS), which is a key step in becoming a formal business for tax purposes. The study highlights the private costs and benefits of formalization and evaluates the effectiveness of different interventions in inducing registration.

Main Points

• Informality in Sri Lanka: Most firms in Sri Lanka are informal, with only 20% of firms with paid workers registered at the DS level.
• Experiment Design: The study involved 520 informal firms in Colombo and Kandy, divided into four treatment groups and one control group. The interventions included:
  • Treatment 1: Information and reimbursement of the registration cost (1,000 LKR).
  • Treatments 2, 3, and 4: Information and monetary payments of 10,000 LKR, 20,000 LKR, and 40,000 LKR respectively.
• Registration Response:
  • Only 17-22% of firms registered when offered 10,000 or 20,000 LKR.
  • 48% of firms registered when offered 40,000 LKR.
  • No significant increase in registration occurred with additional time or a higher payment of 80,000 LKR.
• Reasons for Not Registering:
  • Concerns about labor taxes.
  • Issues related to land ownership, particularly informal land leases.
  • Bureaucratic challenges, with higher registration response in Colombo due to a simpler process.
• Consequences of Formalization:
  • Formalized firms had higher profits, but this was largely driven by a few rapidly growing firms.
  • There was no significant increase in access to government contracts, bank loans, or participation in government programs.
  • Formalized firms were more likely to advertise and use receipt books.
  • Owners of formalized firms reported increased trust in the state and greater legitimacy for their businesses.
  • Formalization also led to a greater perception that small businesses should pay taxes, though some firms felt they were overtaxed.

Key Findings

• Latent Demand for Formalization: While many informal firms expressed willingness to formalize if costs were reduced, the actual registration rate was low without substantial financial incentives.
• Cost-Benefit Analysis: Firms perceived the main costs of formalization as tax obligations and increased scrutiny by authorities. Benefits were primarily seen as access to formal banking services and legitimacy.
• Bureaucracy and Land Issues: The complexity of the registration process and land ownership concerns were significant barriers to formalization.
• Impact of Formalization: The benefits of formalization were not uniform across all firms. Most firms saw no increase in profits, but a few experienced substantial growth.
• Policy Implications: The study suggests that modest increases in the net benefits of formalization could significantly increase the number of informal firms that choose to formalize. It also highlights the need for policy interventions that address both the cost and the legitimacy concerns of informal firms.

Methodology and Data

• Baseline Survey: Conducted in January to May 2008, covering 2,865 enterprises in 31 cities and towns (excluding the Northern Province).
• Follow-up Surveys: Conducted at 15, 22, and 31 months post-intervention to assess the long-term effects of formalization.
• Sample Characteristics:
  • 90% of the firms had 5 or fewer paid employees.
  • The median monthly profit was 25,000 LKR (approximately US$220).
  • Most firms were more than three years old.
  • The majority of firms were standalone, with only 8% located inside homes.

Conclusion

• The study finds that while informal firms are not entirely averse to formalization, they require substantial financial incentives to do so.
• The consequences of formalization are mixed, with some firms benefiting more than others.
• The findings suggest that reducing the costs and improving the accessibility of formalization can lead to a significant shift in the behavior of informal firms.
• The paper contributes to the broader understanding of how formalization affects small enterprises and the role of policy in encouraging it.

References to Related Literature

• The study builds on previous research on the informal sector and formalization, including the de Soto "exclusion" view and the "exit" view of informality.
• It also references studies from other countries (e.g., Mexico, Brazil) that have examined the impact of regulatory reforms on firm formalization.
• The findings support the idea that formalization can improve firm performance, but the effects are not uniform and depend on the firm's characteristics and the regulatory environment.