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<p>This study investigates the impact of competition from informal or unregistered firms on the likelihood of obtaining internationally recognized quality certificates by formal manufacturing small and medium enterprises (SMEs) in 16 countries in Latin America and the Caribbean. We find that the impact is positive. A unit-standard-deviation increase in informal competition leads to an increase in the probability of having a quality certificate by 2.9-to-3.6 percentage points. This is a large effect, given that only 10.4 percent of SMEs have a quality certificate. Consistent with the “legalist” and “parasite” models of informality, the positive impact of informal competition is significantly bigger in countries with weaker rule of law and greater regulatory burden on formal firms. We provide several layers of checks against endogeneity including instrumental variables estimation.</p>

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Does competition from informal firms encourage the formal firms to obtain quality certificates?

  • 期刊论文

  • 发表日期：

    2026年5月2日

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  • Mohammad Amin,
  • Caroline Nogueira

摘要

This study investigates the impact of competition from informal or unregistered firms on the likelihood of obtaining internationally recognized quality certificates by formal manufacturing small and medium enterprises (SMEs) in 16 countries in Latin America and the Caribbean. We find that the impact is positive. A unit-standard-deviation increase in informal competition leads to an increase in the probability of having a quality certificate by 2.9-to-3.6 percentage points. This is a large effect, given that only 10.4 percent of SMEs have a quality certificate. Consistent with the “legalist” and “parasite” models of informality, the positive impact of informal competition is significantly bigger in countries with weaker rule of law and greater regulatory burden on formal firms. We provide several layers of checks against endogeneity including instrumental variables estimation.