Business Formalisation in Vietnam

We estimate the impact of business formalisation using nationally representative panel data on businesses in Vietnam. Our data allows us to observe businesses for two surveys prior to obtaining a licence and hence to control for differential trends before formalisation. We find that obtaining a licence is not associated with an increase in profits or other business outcomes such as revenue, expenses, and employment once we control for differential trends. Controlling for trends is crucial, as estimates that ignore trends consistently find a larger positive association between becoming licensed and business performance. Our results suggest that inducing more businesses to register is unlikely to bring about large-scale changes for these businesses.