A survey of over 500 informal businesses in Colombo and Kandy districts in Dec 2008 to investigate the Demand for Formality among informal unregistered businesses. KCG also supervised the administering of registration information treatment and cash treatment to randomly selected enterprises.
Three follow-up surveys in Aug 2010, Mar 2011, Dec 2011 were also were carried out.
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 behaviour, 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).
