Informal Sector and Competition: A Comprehensive Agenda for Research and Action2009

Overview

The paper recommends that the decision to formalise the informal sector should be based on a cost-benefit analysis. It goes on to elaborate various methods of formalisation: reduction in the number of procedures/clearances involved or time involved in registration of firms in the formal sector, extent of corruption that determines the magnitude of bribery involved in the same process; and reduction of disincentives such as high tax rates, coupled with enhancement of incentives such as credit leveraging and entrepreneurial assistance/training provided by the government to the formal sector.