ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Transition from Informal Firms to Formal

What prevents informal firms from converting to formal? This study develops a self-choice model where the owners are driven by their professionalism, asset holding, landownership, and tax rates. It is found that the owner’s self-drive and efficiency parameter to convert to formality is explained by their professional skills and ownership status.

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