In Simple Words
Imagine paying for a gym membership during a promotional campaign, but discovering after six months that health hasn't improved while monthly fees drain the bank account. When the annual renewal date arrives, the member cancels the contract and returns to working out at home.
Informal firms in Bogota
- No study intervention
- Group used for comparison
- Personalized agent visits offered
- No lasting registration advantage
Bogota trial, two years after the intervention. Firms stopped renewing licenses; this does not establish that every firm had zero business benefit.
See source →Study conditions — J-PAL Colombia evaluation ↗Research question
Initial formalization drives successfully persuade informal firms to register, but firms subsequently abandon formal legal status when registration fails to improve sales, profits, or market opportunities.
Participants
Informal micro-enterprises in Bogotá, Colombia.
Study Design
Longitudinal Randomized Controlled Trial (RCT) tracking firm registration renewal over time following personalized assistance.
Results
Personalized assistance initially increased business formalization, but the effect dissipated completely over time as newly formalized firms chose not to renew registration after experiencing zero gain in sales or profits.
Takeaway
Bundle initial business formalization with access to government procurement contracts, commercial loans, and enterprise growth support to ensure high registration renewal rates.
Source and citation
See source →Evidence in Labor Market Policies and Implications for Brazil: Informality
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Read alongside the research
Plain-English glossary
Original explanations, informed by the references below. Examples are illustrations, not data from the studies above. The research text stays unchanged.
- Randomized controlled trial
A study that uses chance, like drawing lots, to decide who receives each option being compared. Researchers compare the groups’ outcomes to estimate the effect of those options.
ExampleA lottery assigns volunteers to a training programme or a comparison group. Researchers then compare their outcomes.
GET-IT glossary · Randomized study ↗Read more about randomized controlled trial →