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Business Formalization in Vietnam

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  • Brian McCaig, Jordan Nanowski

    (Wilfrid Laurier University)

Abstract

We estimate the impact of business formalisation using nationally representative panel data on businesses in Vietnam. Our data allows us to observe businesses for two surveys prior to obtaining a license and hence to control for differential trends before formalisation. We find that obtaining a license is not associated with an increase in profits or other business outcomes such as revenue, expenses, and employment once we control for differential trends. Controlling for trends is crucial, as estimates that ignore trends consistently find a larger positive association between becoming licensed and business performance. Our results suggest that inducing more businesses to register is unlikely to bring about large-scale changes for these businesses.

Suggested Citation

  • Brian McCaig, Jordan Nanowski, 2018. "Business Formalization in Vietnam," LCERPA Working Papers 0113, Laurier Centre for Economic Research and Policy Analysis, revised 01 Feb 2018.
    • Handle: RePEc:wlu:lcerpa:0113
    Note: LCERPA Working Paper No. 2018-7, February 2018.
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    References listed on IDEAS

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    Cited by:

    1. Hernando Gutierrez, Luis & Rodriguez-Lesmes, Paul, 2023. "Productivity gaps at formal and informal microfirms," World Development, Elsevier, vol. 165(C).
    2. Colin C. Williams, 2023. "A Modern Guide to the Informal Economy," Books, Edward Elgar Publishing, number 18668.
    3. Nam Hoang Vu & Tram-Anh Nguyen & Tram Bao Hoang & Nguyen Viet Cuong, 2024. "Formal Firms with Bribery in a Dynamic Business Environment," Journal of Business Ethics, Springer, vol. 191(3), pages 571-589, May.
    4. Sènakpon Fidèle A. Dedehouanou & Didier Y. Alia, 2020. "Dynamics of off-farm self-employment in West African Sahel," WIDER Working Paper Series wp-2020-142, World Institute for Development Economic Research (UNU-WIDER).
    5. Max Gallien & Vanessa van den Boogaard, 2023. "Formalization and its Discontents: Conceptual Fallacies and Ways Forward," Development and Change, International Institute of Social Studies, vol. 54(3), pages 490-513, May.
    6. Truong, Thao Duc & Bui, Phuong Cam, 2022. "The lasting effect of formalization on credit access: Evidence from Vietnamese private SMEs," Finance Research Letters, Elsevier, vol. 47(PB).
    7. Andrea Floridi & Binyam Afewerk Demena & Natascha Wagner, 2022. "A Game Worth The Candle? Meta-Analysis Of The Effects Of Formalization On Firm Performance," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 27(04), pages 1-27, December.

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    Keywords

    Informal; Formalization; Asia; Vietnam; Household business;
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