Firm formalization and sustainable development

Abstract:

Many development policies embrace firm formalization as important to sustainable development. Forexample, the United Nations’ Sustainable Development Goal 8.3 seeks to “encourage theformalization and growth of micro-, small- and medium-sized enterprises” (UN, 2016: 92). TheInternational Labour Organization’s Decent Work agenda (ILO, 2018: 3) endeavors to “facilitate thetransition to the formal economy, create new formal jobs and prevent further informalization”. Thisemphasis is undeniably warranted. An estimated 89% of all workers in Sub-Saharan Africa areemployed in the informal economy, and thus deprived of institutional protection and decent workingconditions (ILO, 2018). The COVID-19 pandemic has further exacerbated this situation (Narula,2020). Moreover, as informal firms operate outside the reach of official governance they are morelikely to evade regulations, pollute, and contribute to environmental degradation (Abid, 2015).