Do Informal Businesses Gain From Registration and How? Panel Data Evidence from Vietnam

Using dynamic specifications, we find a significant impact of formalization on annual value added of 20% on average. More importantly, we show that this improvement is not valid for the smallest units, and that it is made possible for the others by changing their operating conditions. Released from the constraints of informality, they can access better equipment, increase their scale of operation, and operate in a more competitive environment.