SMALL FIRMS AND THE INFORMAL SECTOR IN REGION OF PEJA

Abstract

Although the development of a new private sector is generally considered crucial to economic transition, there has been relatively little
empirical research on the determinants of startup firm Growth. These days, everybody loves small firms and their clusters–donors large
and small, governments and Nongovernment organizations, left and right. Some characterize small firms (SFs) as the proper subject of
social policy and safety nets, and house SF programs in departments of social welfare or labor. Others see SFs as the stuff of “serious”
economic development, and focus on upgrading their collective efficiency, productivity, and market access. Unfortunately, the combination
of the social-policy view with the inevitable local politics of SFs generates a brew that inadvertently undermines not only the upgrading
agenda, but certain aspects of the social-policy agenda itself–namely, better environmental, labor and health-and-safety practices and
protections. This article explains how this happens, and shows that things don’t always need to turn out that way, especially if donors and others pay attention to the histories lying behind today’s thriving SF clusters in developing countries.
JEL CLASSIFICATION NUMBERS: C25, C51