TY  - RPRT
        AU  - Bennett, John
AU  - Estrin, Saul
        TI  - Informality as a Stepping Stone: Entrepreneurial Entry in a Developing Economy
        PY  - 2007/Jul/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 2950
        UR  - https://www.iza.org/publications/dp2950
        AB  - We model decisions with respect to formality or informality for entrepreneurs in a new industry for a developing economy. We show that informality allows a leader to explore, without significant sunk costs, the potential profitability of the industry; that is, informality may be a stepping stone, enabling an entrepreneur to experiment cheaply in an uncertain environment. There are circumstances under which, without this option, the industry would not become established. We analyse the roles of parameters such as a minimum wage rate and we show that the existence of finance constraints can actually encourage entry in this context.
        KW  - developing economy
KW  - entry
KW  - informal sector
        ER  -