- Income tax data: this includes many variables, including a description of the firm’s activity, revenue, profits, taxes, tax credits, inventory, cost of goods sold (basically all variables from a standard income statement). Because most variables are not reported very well, except for the larger firms, we will focus on sales as a measure of total firm size. This dataset is the universe of registered firms in Rwanda and includes both firms that do or do not have any employees, such as sole entrepreneurships.

These three datasets are merged using the unique taxpayer identification number assigned to the firm. The trade information contains the largest number of unique observations, but not all of them are formally registered firms.

We observe the information in all three data sources for a panel of firms over time, which allows for both a cross-sectional and growth analysis. The sample period starts in 2008 and goes to 2016. The coverage of the payroll and tax data tends to grow over time, but the overall number of firms surveyed is quite limited. This is not unexpected as the administrative information only covers firms in the formal sector. Aggregating over the three goods producing sectors that we focus on—agriculture, mining, and manufacturing—we observe employment for an average 321 firms in each year (of which 42% are from manufacturing). Firm sales is much more widely reported, and across the three sectors we observe an average of 2,926 firms in each year (30% from manufacturing).

The aggregate statistics already showed that engagement in GVCs is rather limited for this small, landlocked country. The administrative data illustrates directly that even the total number of registered manufacturing firms is remarkably small. But that is simply the reality in many economies dominated by the informal sector. It also presents an unavoidable challenge for policy as formal registration is likely to be a first step before firms can start integrating in GVCs.

By construction, our data will miss a limited volume of cross-border economic activity by smaller firms that goes unreported. This is especially prevalent in agricultural products, but also in manufacturing there likely is a trail of smaller, informal firms that make small sales in neighboring countries.

# **4. Results**

Our empirical results are organized around eight important messages that we want to highlight. We summarize them at the end, but in the following sub-sections we first discuss the supporting evidence in detail.

## **4.1 Few firms are globally engaged**

We first document the absolute number of firms that export as well as its increase and the growth in absolute export volumes. For this analysis, we use an export threshold of 10,000 USD per year. We exclude smaller exporters for two reasons. First, the customs data also includes trade flows for individuals and firms that export idiosyncratic (often personal) items without really being in that line of business. There is no way to differentiate them from firms that would are indeed producing the items, but are simply not (yet) successful at exporting. Second, we cannot be certain that the registered firms in our dataset represent an exhaustive 8