Working Papers
Shedding light on the shadows of informality: A meta-analysis of formalization interventions targeted at informal firms
[Submitted to Labour Economics]
with Andrea Floridi and Binyam A. Demena
Governments and policy-makers promote formalization through various interventions ranging from simplifying registration procedures to increasing enforcement of the law. But despite various efforts, not much is known about the effects of interventions aiming at formalizing informal firms. This meta-analysis examines the empirical literature on the impact of such formalization interventions. We systematically assessed the literature on the impact of formalization policies resulting in 568 observations from 18 studies conducted by 33 researchers and published until June 2018. We analyzed the meta-impact of (i) cost, (ii) benefit and (iii) enforcement policy interventions and assessed whether the resulting outcomes are influenced by the type of data, econometric approach, and specification as well as publication bias. The findings suggest that policies increasing the benefits after formalization are associated with the highest formalization rates. Yet, the overall impact of the studied policy interventions remains weak when we control for publication quality and method heterogeneity. Overall, we only find modest evidence for increased formalization associated with the so far implemented interventions suggesting that further piloting and experimenting is needed to achieve large-scale formalization of the informal economy.
A study of Egyptian and Palestine trans-formal firms – a neglected category operating in the borderland between formality and informality
with Andrea Floridi and John Cameron
This article outlines a new approach to firm behaviour different from both ‘dichotomist’ and ‘continuum’ formal/informal models. The approach adopts a new heuristic based on the notion of a borderland as space of interaction between dimensions of formality, and creates an umbrella category of trans-formal firms, which are neither purely formal nor informal. Three formality dimensions are adopted: (i) registration of the firm, (ii) existence of a bank account in the name of the firm, and the (iii) presence of an official balance sheet. After elucidating the new approach theoretically, the paper assesses the analytical capacity of the approach with quantitative and qualitative information representing 16 Egyptian and 16 Palestinian firms. The majority of the considered firms are found to be trans-formal moving in a space of decision-making representing our new, broadened notion of borderland showing that policies aiming at formalization processes misrepresent the realities of significant numbers of firms.
Revisiting the Nature vs. Nurture Debate: Patterns of Cognitive Development of Filipino Children
with Stella Quimbo, Aylin Küntay, Xylee Javier and John Peabody
Using the QIDS panel dataset collected in 2003 and 2007, we analyze the determinants of cognitive abilities among Filipino children. We are interested in distinguishing between the effects of the learning and family environment versus health and nutrition in children aged 6 months to 7 years. Cognitive abilities are measured using the Bayley Scales of Infant Development and the Wechsler Preschool and Primary Scale of Intelligence. The home learning environment is assessed using the Home Observation for Measurement of the Environment. Health and nutrition markers include weight-for-age, height-for-age, hemoglobin and lead levels in blood. Employing a child fixed effects model, we find that the home learning environment has a significant positive effect on cognitive ability explaining more than one fourth of the standard deviation of cognitive development. Nutrition markers, particularly, weight-for-age and hemoglobin levels in blood also have significant positive effects on cognitive ability. Genetic predisposition and other time-invariant traits explain roughly 40 percent of the variation in cognitive ability. A one standard deviation increase in the home learning environment explains 30.4 percent of the standard deviation in cognitive ability whereas a one standard deviation increase in weight-for-age explains another 8.9 percent. Our results indicate that parental inputs or nurture can compensate for weak preconditions and foster cognitive development among young children.
Shedding light on the shadows of informality: A meta-analysis of formalization interventions targeted at informal firms
[Submitted to Labour Economics]
with Andrea Floridi and Binyam A. Demena
Governments and policy-makers promote formalization through various interventions ranging from simplifying registration procedures to increasing enforcement of the law. But despite various efforts, not much is known about the effects of interventions aiming at formalizing informal firms. This meta-analysis examines the empirical literature on the impact of such formalization interventions. We systematically assessed the literature on the impact of formalization policies resulting in 568 observations from 18 studies conducted by 33 researchers and published until June 2018. We analyzed the meta-impact of (i) cost, (ii) benefit and (iii) enforcement policy interventions and assessed whether the resulting outcomes are influenced by the type of data, econometric approach, and specification as well as publication bias. The findings suggest that policies increasing the benefits after formalization are associated with the highest formalization rates. Yet, the overall impact of the studied policy interventions remains weak when we control for publication quality and method heterogeneity. Overall, we only find modest evidence for increased formalization associated with the so far implemented interventions suggesting that further piloting and experimenting is needed to achieve large-scale formalization of the informal economy.
A study of Egyptian and Palestine trans-formal firms – a neglected category operating in the borderland between formality and informality
with Andrea Floridi and John Cameron
This article outlines a new approach to firm behaviour different from both ‘dichotomist’ and ‘continuum’ formal/informal models. The approach adopts a new heuristic based on the notion of a borderland as space of interaction between dimensions of formality, and creates an umbrella category of trans-formal firms, which are neither purely formal nor informal. Three formality dimensions are adopted: (i) registration of the firm, (ii) existence of a bank account in the name of the firm, and the (iii) presence of an official balance sheet. After elucidating the new approach theoretically, the paper assesses the analytical capacity of the approach with quantitative and qualitative information representing 16 Egyptian and 16 Palestinian firms. The majority of the considered firms are found to be trans-formal moving in a space of decision-making representing our new, broadened notion of borderland showing that policies aiming at formalization processes misrepresent the realities of significant numbers of firms.
Revisiting the Nature vs. Nurture Debate: Patterns of Cognitive Development of Filipino Children
with Stella Quimbo, Aylin Küntay, Xylee Javier and John Peabody
Using the QIDS panel dataset collected in 2003 and 2007, we analyze the determinants of cognitive abilities among Filipino children. We are interested in distinguishing between the effects of the learning and family environment versus health and nutrition in children aged 6 months to 7 years. Cognitive abilities are measured using the Bayley Scales of Infant Development and the Wechsler Preschool and Primary Scale of Intelligence. The home learning environment is assessed using the Home Observation for Measurement of the Environment. Health and nutrition markers include weight-for-age, height-for-age, hemoglobin and lead levels in blood. Employing a child fixed effects model, we find that the home learning environment has a significant positive effect on cognitive ability explaining more than one fourth of the standard deviation of cognitive development. Nutrition markers, particularly, weight-for-age and hemoglobin levels in blood also have significant positive effects on cognitive ability. Genetic predisposition and other time-invariant traits explain roughly 40 percent of the variation in cognitive ability. A one standard deviation increase in the home learning environment explains 30.4 percent of the standard deviation in cognitive ability whereas a one standard deviation increase in weight-for-age explains another 8.9 percent. Our results indicate that parental inputs or nurture can compensate for weak preconditions and foster cognitive development among young children.
