The Impact of Formalization Assistance on Informality: Experimental evidence from Colombian mines

More than 60% of global employees work in the informal economy. One of the reasons that firms remain in informality is the length and cost of the formalization process. I explore whether assisting in the formalization process could reduce informality in the mining sector in Colombia. The study is a randomized control trial with informal coal and gold mines. After two years of treatment, the formalization assistance treatment did not increase formalization rates, and attrition was high. However, the treatment increased miners’ income but not expenses, suggesting the miners are saving more, possibly for the titling costs. The high attrition and unsuccessful treatment highlight the difficulties of formalizing the mining sector.

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