Publication

This paper examines the hypothesis that firms choose to locate in the informal sector because high cost of regulation prevents them from becoming formal and productive. Using data from surveys of microenterprises in South Africa, Namibia, Botswana, Kenya, Uganda, Tanzania and Rwanda the authors come to a nuanced conclusion and partially reject the hypothesis. According to them, the picture looks different in countries with a strong business environment such as in Southern Africa from countries with a weak business environment.