Impact Evaluation of the Entreprenant Status in Cotonou

In developing countries a large majority of small and medium firms operate in the informal sector. In Benin, this is particularly the case and the national statistics agency estimated that the informal sector represented up to 70% of the GDP and 95% of employment in 2009. This evaluation takes advantage of the creation of a new legal status for small firms by the Government of Benin to study the impact of three different packages of formalization incentives on formalization rate and firm performances. 3,600 informal businesses operating in Cotonou have been randomly allocated into three treatment and one control groups.

Delivery partner 
Investment Climate Impact Program
Hypotheses/research question 
Do firms voluntarily move into the formal sector if the costs of formalisation are highly reduced? What is the optimal package of incentives to increase formalisation? To what extent is the fear of tax administration an important barrier to formalisation? What is the effect of becoming formal on firm performance and access to credit?
Study design 
McKenzie, D., Benhassine, N., Pouliquen, V., & Santini, V., 2015. 'Impact Evaluation of the Entreprenant Status in Cotonou'. AEA RCT Registry, March 25.