Local economic governance and formalisation of micro and small firms: a gender perspective

Informal enterprises are prevalent in developing countries, and many of these are owned by women. Informally working women are vulnerable and face disadvantages in accessing government support. This study examines the relationship between local economic governance and formalisation of micro and small firms with a focus on gender dynamics. While we find a positive association between the quality of provincial economic governance and businesses’ formalisation status, there is no gender differential effect of economic governance. However, gender disparities emerge when we explore the multidimensions of provincial economic governance separately. Notably, there is a higher probability of women-owned firms to be formal when reduced time cost and effective legal institutions are prevalent in local areas. In contrast, the formalisation of men-owned firms is closely tied to other facets of local governance, notably entry costs and labour training. Our findings will assist policymakers in designing better policy frameworks and implementing more effective institutional reforms to advance gender parity and stimulate the formalisation of women-owned businesses.