The paper shows how, when the enforceability of regulationsis size-sensitive, price competition can lock firms into informality and,thus, smallness, depending on the form of the production function. In thatcontext, exogenous "help" packages targeted to informal firms "promote"micro and small enterprises (i.e., increase their numbers) but do not"develop" them (i.e., foster their growth). The "help" only generates ashort-term span of abnormal profits for existing informal firms, and a long-term income transfer toward informal-market consumers. The model istested in the context of Egypt's micro and small enterprise sector.
Small Business Economics – Springer Journals
Published: Oct 8, 2004
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