Towards a better integration of the informal sector : three empirical essays on the interaction between formal and informal firms in Egypt and beyond.

Summary Since the 2000s, the economies of the African continent have shown remarkable growth. However, the current context jeopardizes the sustainable development of the private sector. Imperfections in the institutional system and the business environment hinder the stable development of enterprises and pave the way for the growth of a very persistent informal sector. This thesis re-opens the polemical debate on the informal sector by emphasizing the entrepreneurial capacity of this sector rather than the threats it represents. In order to understand the strong persistence of informality despite its negative impacts, we test the extent to which competition between formal and informal firms could affect the Egyptian economy. We find that more intense competition induces formal firms to become more productive. We also extend our analysis to sub-Saharan African countries by highlighting the stimulating effect of taxation and regulation on the strength of competition between formal and informal firms. Our results call for the inclusion of the informal sector in public policies aimed at tax and regulatory reform in Africa. These policies should also focus on providing firms with access to finance, infrastructure, and training as the main tools to induce the formalization process and promote economic growth. This thesis highlights the importance of rethinking the effects of the informal sector in developing countries, while considering it as a stimulator of economic growth rather than a threat.