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Business training programs and microenterprise formalization in Peru

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  • Manuel Barron
  • Antonio Belso-Martinez

Abstract

A large share of workers in developing countries are constrained to self-employment mainly due to lack of opportunities in wage employment, becoming entrepreneurs de facto constrained to the informal sector, with meager profits and poor working conditions. In response to this problem, several governments offer business training programs targeted at these entrepreneurs with two aims: to improve business outcomes and to promote enterprise formalization. This paper explores the relation between business training programs and formalization using data of 1,133 participants in two entrepreneurship programs in Peru. Difference-in-differences with various matching techniques indicate that formalization increased by 20–25 percentage points 2 years after program participation. This study presents suggestive evidence of three potential mechanisms behind this increased formalization rates: the opportunity to reconsider participants’ original business plans, the demystification of the tax procedures, and access to seed capital.

Suggested Citation

  • Manuel Barron & Antonio Belso-Martinez, 2020. "Business training programs and microenterprise formalization in Peru," Cogent Economics & Finance, Taylor & Francis Journals, vol. 8(1), pages 1791546-179, January.
    • Handle: RePEc:taf:oaefxx:v:8:y:2020:i:1:p:1791546
    DOI: 10.1080/23322039.2020.1791546
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    Cited by:

    1. Estevão, João & Lopes, José Dias & Penela, Daniela, 2022. "The importance of the business environment for the informal economy: Evidence from the Doing Business ranking," Technological Forecasting and Social Change, Elsevier, vol. 174(C).
    2. Acosta, Matias, 2021. "¿Cómo afecta la formalización del trabajo informal independiente de barrios populares a la pobreza multidimensional urbana?," SocArXiv hfmnb, Center for Open Science.

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