Are Large Informal Firms More Productive than the Small Informal Firms? Evidence from Firm-Level Surveys in Africa. (October 2015)

• Record Type: Journal Article
• Authors: Amin, Mohammad; Islam, Asif
• Is Part Of: World development. Volume 74(2015)
• Page Start: 374
• Page End: 385
• Publication Date: 2015-10
• Subjects: informal -- productivity -- employment -- Africa -- firm-size; Economic history -- 1990- -- Periodicals; Economic assistance -- Developing countries -- Periodicals; 330.9
• DOI: 10.1016/j.worlddev.2015.05.008
• Languages: English
• ISSNs: 0305-750X

Abstract

Highlights: Low productivity of informal firms is often attributed to their small size. Does an increase in firm-size of informal firms increase their productivity? We find small informal firms to be more productive than large informal firms. Increasing size of informal firms may not solve the problem of low productivity. Summary: Using data for over 500 informal or unregistered firms in seven countries in Africa, this study explores how labor productivity varies between small and large informal firms. We find robust evidence that small informal firms have higher labor productivity than large informal firms. Thus, even though poor performance of informal firms is typically attributed to their small size vis-à-vis registered or formal sector firms, incremental increases in the size of informal firms does not necessarily imply a narrowing of the formal–informal firm productivity gap.