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The high incidence of informality in developing countries acts as a drag on economic development due to the associated efficiency and equity costs and implied weak governance. Policy makers therefore want to reduce informality. This note presents guidance on policy levers to make formality more attractive and informality less attractive from the perspective of small, medium and large firms, and from the perspective of micro-entrepreneurs. It elaborates the challenges for shifting incentives in favor of being formal and employing workers on formal contracts rather than operating under the regulatory radar, and presents a range of policy options.

Labor Markets --- Private Sector Development

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Over the past decade, there has been increased interest in improving business regulations, in part because of the increased availability of data that can inform and monitor those improvements. This paper analyzes whether these regulatory changes are linked to economic outcomes. With panel data for 10 years across more than 180 countries, the paper establishes the link between business regulations, firm creation, and growth. It is found that an improvement of 10 points in the overall measure of business regulations is linked to an increase of around 0.5 new businesses per 1,000 adults. Moreover, the results show that although small changes in the overall level of business regulations may have a negligible link to growth, moving from the lowest quartile of improvement in business regulations to the highest quartile is associated with a significant increase in annual per capita growth of around 0.8 percentage points. In addition, the results highlight the importance of sound entry and exit regulations and sound credit market regulations and court enforcement for growth.

Macroeconomics and Economic Growth --- Private Sector Development

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Conventional wisdom suggests too little information and communication technologies (ICT) in poor countries. Indeed, within 70 countries at various levels of development, there is a positive relationship between income per capita and the capital share of ICT. While this regularity is consistent with explanations based on technology adoption lags and ICT-labor substitutability, there is little empirical support for these hypotheses. Instead, the paper establishes that this regularity can be fully accounted for by (a) relatively higher ICT prices in low-income countries and (b) industrial composition.

Macroeconomics and Economic Growth --- Private Sector Development

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In May 2015, the Boyner Group, in a joint initiative with the International Finance Corporation (IFC), launched the Boyner Group's good for business program, working with female managers and owners of companies that are suppliers to the Boyner Group. The program is part of Boyner Group's broader goal of promoting equal opportunity for men and women and establishing gender equality within the company and its supply chain. Women-led companies make up 17 percent of all direct suppliers to the Boyner Group. The program aims to raise their productivity and business performance, building the participants' capacity through classroom training, coaching, guest lectures, and access to market opportunities through networking events, and a vendor fair. After the successful completion of the pilot phase, the Boyner Group good for business program aims to engage more of its female suppliers through further sessions of the program. The objective of this study is to inspire and inform corporates, donors, and others interested in developing similar programs and to share some of the learning from the pilot phase of the good for business program.

Business Environment --- Gender --- Private Sector Development

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Tunisian social development policy making has always counted on energy subsidies to play a pivotal role. Due to the increasingly unsustainable budget implications, a new strategy has begun to reform the subsidy system in the energy sector while striking a balance between improving fiscal and equity considerations without increasing social tensions. This paper presents an analysis of the fiscal and distributive consequences of the changes to the subsidy setup announced by the government at the end of 2014. The results show that raising electricity prices for consumers and removing subsidies for other energy sources would lead to a short-term increase in the poverty rate of 2.5 percentage points. In addition, compensation mechanisms that could be readily implemented (such as universal coverage or building on the existing health cards system) will not bring substantive counterweight to the increased poverty, even if all savings of reforms could be perfectly channeled as cash transfers. The analysis suggests that bold reforms of energy subsidies need to be accompanied by equally bold improvements to the targeting schemes of public spending if poverty and disparities are to be substantively reduced.

Energy --- Macroeconomics and Economic Growth --- Private Sector Development --- Transport