The formalization of the Egyptian informal sector: a behavioral and experimental approach

Abstract

PurposeThis paper aims at assessing the impact of a number of behavioral interventions on the willingness of informal businesses, in the Egyptian informal sector, to join the formal sector.Design/methodology/approachThis paper uses an experimental methodology to examine the impact of behavioral interventions on the formalization of the Egyptian informal sector. Specifically, it conducts a survey experiment on a total of 240 informal businesses, operating in the Egyptian informal sector. The primary data collected from the survey experiment is then analyzed using a binary logistic regression to assess the impact of the behavioral primes on the probability of joining the formal market.FindingsThe empirical findings of the survey experiment indicate that the biggest obstacle facing informal businesses is finding a formal source of finance that could help them in penetrating the market. Providing informal businesses with information on funding opportunities offered by the ministry of micro, small and medium enterprises (MSME) significantly increased the probability of joining the formal sector to benefit from this opportunity.Originality/valueThis paper is the first to apply behavioral primes, in the form of informational cues, to the Egyptian case of informal business owners. Previous research on the use of behavioral nudges and primes has focused mainly on the western economies.