DOI: 10.34894/ohwfju
title: Replication Data for: Chapters 2, 3, 4 & 5 of "Essays on Informal versus Formal Economy Choices"

description: The informal economy is associated with the vulnerability and the poverty of workers.
The dissertation’s main objective was to examine the main determinants of the informal economy to inform policymakers on the best approach to tackle it. This
thesis’s novelty stems from the empirical evidence it offers on the main strategies used so far to tackle informality while considering the African continent’s specificities.
 We approach these preoccupations by asking the following questions:

1.Does local government regulation of the informal sector reduce informal
entrepreneurship? And what are the potential unwanted consequences of such a
stricter approach towards informality?
2. Do the perceived benefits from the formal financial sector motivate firms to be
tax compliant? And does the existence of informal finance mitigate that effect?
3. Do small firms benefit from formalisation? And what other measures can
enhance those potential benefits?
4. Does an employment tax incentive for young people increase their likelihood to
be employed and formally employed?

Chapter 2 exploits a unique regulatory framework of the informal sector in South-Africa, to estimate the effects of trading permits in the informal sector. We rely on individual panel data and municipality laws to show that a mandatory trading permit in the informal sector reduces informal entrepreneurship, particularly in the trading sector. To provide a causal effect of these regulations, we apply a difference in difference strategy. We use data bought from Sabinet Legal platform and data from National Income Dynamics Study in south-Africa.

Chapter 3 investigates the effect of low costs of banks on small firms compliance with value-added tax, profit tax and local tax. This chapter equally explores the mitigating impact of informal finance on the role of low costs of banks in small firms’ tax compliance. We estimate a recursive trivariate probit model that simultaneously estimates an equation of tax compliance, an equation of informal finance, and an equation of low costs of banks. The data used is the Small Business ICT Access and Usage Survey 2011-2012 after a request to the University of Cape Town. 

Chapter 4 studies the impacts of formalization for micro and small firms on a range of outcomes for several Sub-Saharan countries. More specifically, it explores the effects
of formalization on firms’ performance, export, access to trade credit, and loans from banks. It equally assesses whether receiving support from incubators and training
enhance the benefits and or mitigate the potentially adverse effects for micro firms.The data used is the Small Business ICT Access and Usage Survey 2011-2012 after a request to the University of Cape Town. 
 We adopt an endogenous switching probit model to estimate the impacts on a firm’s performance, exports, and access to trade credit and loans from banks.

Chapter 5 investigates the effect of an Employment Tax Incentive (ETI) on youths’ employment and formal employment in South-Africa. The ETI lowers the cost that employers face when hiring youth. We adopt a difference-in-difference strategy to estimate the impact on employment and formal employment. We use data the NIDS data in South-Africa after a request to data first.