Informal Micro and Small Enterprises in Bolivia - An Empirical Analysis

Abstract

The major part of economic activity in Bolivia is informal, and most enterprises in Bolivia are micro firms. This thesis seeks to examine the characteristics of informal and formal firms in Bolivia. Previous studies show that the relationship between formality and revenue is positive. In order to test this hypothesis we use a survey with micro and small manufacturing firms conducted by the Bolivian National Institute of Statistics. We also examine variables that would affect the probability of a firm being formal. We find a significant positive correlation between annual revenue and formality when controlling for other relevant variables. We also show that firms owned by women have a negative effect on revenue. Furthermore, we find that education increases the probability of owning a formal firm and that the percentage of women in the workforce decreases the probability of a firm being formal.