Cueto, MónicaGómez, Erick2026-03-232026-03-232016http://www.scielo.org.bo/scielo.php?script=sci_arttext&pid=S2415-06222016000400002&tlng=eshttps://andeanlibrary.org/handle/123456789/92742Vol. 1, No. 4Our main question is why a formal firm becomes informal. We hypothesize that sales behavior and trade openness and are related to this behavior. We present empirical evidence to argue that firm informalization is a strategy conducted to face a downturn in sales. However, the country level of trade openness as a proxy for the average level of managerial abilities of firms reduces the impact of a drop in sales on firm informalization. For this purpose, we draw upon data from 636 firms in 12 developing countries from World Bank surveys and apply a simultaneous equation framework with a dichotomous dependent variable.Our main question is why a formal firm becomes informal. We hypothesize that sales behavior and trade openness and are related to this behavior. We present empirical evidence to argue that firm informalization is a strategy conducted to face a downturn in sales. However, the country level of trade openness as a proxy for the average level of managerial abilities of firms reduces the impact of a drop in sales on firm informalization. For this purpose, we draw upon data from 636 firms in 12 developing countries from World Bank surveys and apply a simultaneous equation framework with a dichotomous dependent variable.esInformalityDeveloping economiesTrade opennessArtículo Científico Publicado