Abstract
The private sector in most countries comprises mainly of small firms. The objective of this paper is to investigate whether formality has an impact on the performance of small firms operating in Mauritius. It is very difficult to measure informality as in emerging and less developed economies, the line between formality and informality is often blurred. Different interpretations of formality are used to examine the link between firm performance and formality. This paper uses rich survey data from Mauritius on 3341 small firms consisting of both formal and informal firms to investigate the relationship between firm performance and formality. The paper finds that, broadly, formality has a positive and significant impact on the performance of small firms but the results seem to depend on which measure of performance one is looking at.
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