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The Impact of Formalization Assistance on Informality: Experimental evidence from Colombian mines

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  • Saavedra, S

Abstract

More than 60% of global employees work in the informal economy. One of the reasons that firms remain in informality is the length and cost of the formalization process. I explore whether assisting in the formalization process could reduce informality in the mining sector in Colombia. The study is a randomized control trial with informal coal and gold mines. After two years of treatment, the formalization assistance treatment did not increase formalization rates, and attrition was high. However, the treatment increased miners’ income but not expenses, suggesting the miners are saving more, possibly for the titling costs. The high attrition and unsuccessful treatment highlight the difficulties of formalizing the mining sector.

Suggested Citation

  • Saavedra, S, 2023. "The Impact of Formalization Assistance on Informality: Experimental evidence from Colombian mines," Documentos de Trabajo 20793, Universidad del Rosario.
    • Handle: RePEc:col:000092:020793
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    References listed on IDEAS

    as
    1. Coy, F & Pacheco, J & Peralta, M & Saavedra, S & Llanes, Y, 2021. "Caracterización de minas formales e informales en Colombia," Documentos de trabajo - Alianza EFI 19417, Alianza EFI.
    2. Benhassine,Najy & Mckenzie,David J. & Pouliquen,Victor Maurice Joseph & Santini,Massimiliano & Benhassine,Najy & Mckenzie,David J. & Pouliquen,Victor Maurice Joseph & Santini,Massimiliano, 2016. "Can enhancing the benefits of formalization induce informal firms to become formal ? experimental evidence from Benin," Policy Research Working Paper Series 7900, The World Bank.
    3. Oeindrila Dube & Juan F. Vargas, 2013. "Commodity Price Shocks and Civil Conflict: Evidence from Colombia," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(4), pages 1384-1421.
    4. Galiani, Sebastian & Meléndez, Marcela & Ahumada, Camila Navajas, 2017. "On the effect of the costs of operating formally: New experimental evidence," Labour Economics, Elsevier, vol. 45(C), pages 143-157.
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    More about this item

    Keywords

    Formalization; Mining; Colombia;
    All these keywords.

    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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