THE CONVERSION FROM INFORMALITY TO A FORMAL ENTITY: LINKS TO THE NATURE OF THE OWNER-MANAGER

Abstract

Recognizing the heterogeneity of informal microentrepreneurs, this paper assesses the determinants of their willingness to enter the formal sector. Based on human capital theory and social capital theory, we test the hypothesis that firm decision-making regarding formalization is a function of the nature of the informal microentrepreneur. Using data collected from 500 informal microentrepreneurs in Morocco, and employing a logistic regression model, we find that higher education level, motivation by business opportunity, entrepreneurship training, work experience, gender and the importance of social networks have an impact on the desire to formalize. The paper concludes by discussing the theoretical and policy implications.

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