Formalizing Employment in Africa’s Small Firms: Experimental Evidence from Côte d’Ivoire

Abstract Informal, low-quality employment in micro, small, and medium enterprises (MSMEs) remains a significant challenge in low- and middle-income countries. This study presents evidence from an impact evaluation of a light-touch business consulting program with a focus on employment formalization in Côte d’Ivoire. Using a randomized controlled trial with 448 self-selected MSMEs and a unique employer–employee dataset, it finds that the intervention led to employment formalization, driven by greater minimum wage compliance (12 percentage points (pp)) and an increase in written contract provision (7 pp). The intervention’s financial implications were moderate and the analysis shows suggestive evidence that these improvements were linked to selective formalization driven by employers’ cost-benefit calculation for individual workers. Findings indicate that firms may have partially formalized previously informal payment streams.