Who is Afraid of Informal Competition? The Role of Finance for Firms in Developing and Emerging Economies

Julia Friesen, Konstantin M. Wacker*

*Corresponding author for this work

    Research output: Contribution to journalArticleAcademicpeer-review

    Abstract

    This paper investigates which firms experience the most intense informal competition and highlights the role of access to finance in this context. We use data from the World Bank Enterprise Surveys covering 42,000 firms in 114 countries and take discrete responses on the perceived severity of business obstacles such as informal competition and financial constraints as key variables in our empirical analysis. We find that financially constrained firms face significantly more intense competition by the informal sector and that this effect is economically large. Other influential variables are highly overregulated labor markets, corruption, and firm size. A wide range of robustness checks substantiate these findings.

    Original languageEnglish
    Pages (from-to)1126–1146
    Number of pages21
    JournalEuropean Journal of Development Research
    Volume31
    Issue number4
    Early online date1-Mar-2019
    DOIs
    Publication statusPublished - Sep-2019

    Keywords

    • Enterprise survey data
    • Firm finance
    • Informal competition
    • Ordered logit model
    • SECTOR
    • DETERMINANTS
    • CORRUPTION
    • INNOVATION
    • TAXATION;
    • GROWTH
    • POLICY
    • TAXES

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