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Firm Entry, Exit and Suspension : Evidence from Household Businesses in Vietnam

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  • Islamaj,Ergys
  • Le,Duong Trung
  • Pham,Thanh Minh

Abstract

Household businesses make up the majority of firms in developing economies. This paper uses anovel tax census database that covers the universe of tax-registered household businesses to analyze the entry andexit of owner-operated firms in Vietnam during January 2018 to August 2020. It documents new stylized facts about thesurvival dynamics of informal businesses. First, the entry and exit rates were about 5-6 percent a year fortax-registered household businesses during the pre-pandemic period. Second, an additional 25 percent of householdbusinesses suspended their activity in a year on average, with the annual suspension duration exceeding 2.5 months.The suspension rate spiked to 40 percent during the onset of the COVID-19 pandemic in 2020. Third, the findings show thatthe pandemic-related effects were more pronounced for businesses dependent on face-to-face interactions withcustomers and suppliers. However, these effects were short lived, and activity and earnings rebounded by August 2020.The findings may reflect the relatively short COVID-19 distress in Vietnam during the first phase of the pandemic,but they illuminate both the vulnerabilities and resilience of the household business sector.

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  • Islamaj,Ergys & Le,Duong Trung & Pham,Thanh Minh, 2022. "Firm Entry, Exit and Suspension : Evidence from Household Businesses in Vietnam," Policy Research Working Paper Series 10223, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10223
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    References listed on IDEAS

    as
    1. Loayza, Norman V. & Rigolini, Jamele, 2006. "Informality trends and cycles," Policy Research Working Paper Series 4078, The World Bank.
    2. Loayza, Norman V. & Rigolini, Jamele, 2011. "Informal Employment: Safety Net or Growth Engine?," World Development, Elsevier, vol. 39(9), pages 1503-1515, September.
    3. Yue Li & Martín Rama, 2015. "Firm Dynamics, Productivity Growth, and Job Creation in Developing Countries: The Role of Micro- and Small Enterprises," The World Bank Research Observer, World Bank, vol. 30(1), pages 3-38.
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