Language:
English
Pages:
1 Online-Ressource (32 pages)
Parallel Title:
Erscheint auch als Grover, Arti Does Informality Depress Investments and Job Recovery? F.-L. Evidence from the COVID-19 Crisis in South Asia
Keywords:
Access To Finance
;
Competitiveness and Competition Policy
;
Covid-19 Pandemic Firm-Level Impact
;
Crisis Recovery In Informal Economies
;
Employment and Unemployment
;
Firm's Investment Decision
;
Informality
;
Private Sector Development
;
Private Sector Economics
;
Social Protections and Labor
;
World Bank Business Pulse Survey
Abstract:
Using three rounds of the World Bank's Business Pulse Surveys in South Asia, this paper quantifies the relationship between informality and firms' investment and employment decisions. Accounting for multidimensionality in definition and the margins of informality, the analysis suggests that first, informal firms remain credit and liquidity constrained before and during the crisis, especially the necessity firms. In the pre-crisis period, access to finance is correlated with the extensive margin of informality, while during the crisis, both margins of informality matter. Second, informal firms perceive uncertainty to be higher because of pessimistic expectations on recovery and lower ability to predict future sales, especially the necessity firms. Third, credit constraints and accentuated uncertainty among informal firms discourage investments. Finally, while employment growth is slow and gradual for formal firms as they begin to recover sales, job growth in informal firms does not correspond to the recovery. The results suggest that countries with a large informal sector may face unusually depressed investments and jobs recovery and may have to deploy additional policy levers to accelerate recovery in the post-crisis period
DOI:
10.1596/1813-9450-10580
URL:
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