Abstract
This work studies the impact of the perception of the constraint imposed by the business environment on the disposition of Moroccan informal micro-enterprises to move to the formal sector. We test the hypothesis that this disposition to formalize is based on a profit maximization model consisting in comparing the advantages and costs of setting up in the formal and informal sectors. Using data collected from 100 informal micro-entrepreneurs and using step-by-step logistic regression, we find that the decision of microenterprises to structure themselves is dependent on the socio-economic characteristics of the country in question (macroeconomic context, legal and business regulations, etc.). In addition, we find that the desire for formalization is negatively impacted by perceptions linked to the unavailability of basic infrastructure (electricity, water, telephone, etc.), access to finance, access to premises, access to public contracts, access to information as well as the burden of administrative procedures. These results suggest that improving the business environment and general governance could further drive microenterprises to take the step towards formal entrepreneurship, thus providing a broader tax base and other benefits to society in the future.
Highlights
The informal sector in Morocco is important, both in terms of number of businesses and contribution to GDP
An average annual increase of 19,000 informal production units (IPU) is estimated, as well as the added value created by these units represents 12.6% of the national added value [10] .In addition, in recent years, informality has grown considerably, fueled by various factors
We test the hypothesis that companies decide to settle in the formal or informal sector on the basis of a cost-benefit analysis, which itself depends on several aspects of the business environment
Summary
The informal sector in Morocco is important, both in terms of number of businesses and contribution to GDP. [12] have set up a formalization model around costs and benefits in each investment climate (formal and informal). They assessed approaches to encourage formalization in this paradigm and made recommendations for specific actions. We test this hypothesis using new data at the microenterprise level in Morocco. We test the hypothesis that companies decide to settle in the formal or informal sector on the basis of a cost-benefit analysis, which itself depends on several aspects of the business environment
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
