TY - JOUR AU - Porta,Rafael La AU - Shleifer,Andrei TI - The Unofficial Economy in Africa JF - National Bureau of Economic Research Working Paper Series VL - No. 16821 PY - 2011 Y2 - February 2011 DO - 10.3386/w16821 UR - http://www.nber.org/papers/w16821 L1 - http://www.nber.org/papers/w16821.pdf N1 - Author contact info: Rafael La Porta Brown University 70 Waterman Street Room 101 Providence, RI 02912 E-Mail: rafael.laporta@brown.edu Andrei Shleifer Department of Economics Harvard University Littauer Center M-9 Cambridge, MA 02138 Tel: 617/495-5046 Fax: 617/496-1708 E-Mail: ashleifer@harvard.edu M1 - published as Rafael La Porta, Andrei Shleifer. "The Unofficial Economy in Africa," in Sebastian Edwards, Simon Johnson, and David N. Weil, editors, "African Successes, Volume I: Government and Institutions" University of Chicago Press (2016) M3 - presented at "African Development Successes Conference", July 18-20, 2010 AB - We examine the productivity of informal firms (those that are not registered with the government) in 24 African countries using field work and World Bank firm level data. We find that productivity jumps sharply if we compare small formal firms to informal firms, and rises rapidly with the size of formal firms. Critically, informal firms appear to be qualitatively different than formal firms: they are smaller in size, produce to order, are run by managers with low human capital, do not have access to external finance, do not advertise their products, and sell to largely informal clients for cash. Informal firms thus occupy a very different market niche than formal firms do, and rarely become formal because there is very little demand for their products from the formal sector. ER -