# **Literature**

This paper draws from two tightly linked branches of academic literature. First, it draws from the literature that addresses the effectiveness of measures to ease the business registration processes, particularly in the case of one‐stop shops, and second, it draws from the literature that concerns the rationale for informal firms to formalize. This paper aims to contribute to the first of these by documenting the introduction of a set of reforms aimed at abating the cost of registration in Rwanda and the consequences these reforms had across economic sectors on formal job‐creation and tax revenue. Lack of sufficiently detailed data prevents this paper from shedding light on the drivers of firm registration, and thus from contributing to the second branch of the literature.

## **One‐stop shops and business registrations**

In recent years, many countries have improved the process of business registration by reducing the time, cost, number of procedures and minimum capital requirements to start a business.

The World Bank Doing Business database indicates that more than three‐quarters of the registered countries have enacted at least one reform to improve the ease of registration. Reforms typically include reducing licensing requirements, simplifying registration processes, reducing direct costs, and improving coordination among regulatory agencies. One of the most popular types of reforms is to set up "one‐stop shop" registration centers.

A 2010 literature review on business entry reforms (Motta, Oviedo and Santini 2010) finds the introduction of business entry reforms, such as a one‐stop shop for business registration, to be associated with an increase in the number of registered firms. They also find that a reduction in the cost of registering a business induces more registration in industries with low barriers to entry than in industries with high barriers to entry.

Examples of positive associations between the introduction of one‐stop shops and increases in business registrations are found throughout the literature and across income levels. Reforms that cut registration time or cost (or both) by more than 40% during the 2003‐2008 period across a sample of 92 countries are found to have had a statistically significant impact on new business creation (Klapper and Love 2010). The introduction of a one‐stop shop in 308 counties of Portugal, reducing the number of days to register a business by 91%, has been associated with a 17 percent an increase in registrations (Branstetter, et al. 2010). Reforms introduced in some of the most populous and economically developed municipalities of Mexico were associated with a 5 percent increase in the number of registered businesses (Bruhn 2011) (Kaplan, Piedra and Siera 2011). Similarly, the introduction of one‐stop shops in six major cities in Colombia was found to be associated with an increase of 5 percent in registered businesses (Cardena and Rozo 2007).

There are however signs that these results are not necessarily universal. A recent study from the Minas Fácil Expresso program in the state of Minas Gerais, Brazil, finds that the program led to a reduction in the number of firms registering during the first two months of implementation (Bruhn and McKenzie 2013).

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