Does education influence the intention to formalize economic activities? Evidence from Morocco

Abstract

This study examines the role of the level of education in the formation of the intention to formalize economic activities carried out in the informal sector in Morocco. Grounded in the theoretical framework of human capital, the study considers education as a multidimensional lever influencing entrepreneurs’ cognitive, organizational, and strategic capacities, as well as their relationship with formal institutions. The objective is to analyze how education shapes trade-offs between remaining in informality and transitioning to the formal sector, by affecting the perception of the costs and benefits of formalization, the management of institutional risk, and access to structured economic opportunities. The empirical analysis is based on a field survey conducted among 275 Moroccan entrepreneurs operating in the informal economy, mainly in the sectors of trade, handicrafts, and services. A binary Logit model is employed to estimate the effect of several education-related mechanisms on the intention to formalize, while incorporating individual and contextual control variables. The results indicate that the intention to formalize is significantly influenced by managerial skills, cost–benefit analysis capacity, integration into formal networks, and a reduction in institutional risk aversion. By contrast, access to information, when considered in isolation, is not sufficient to trigger an intention to formalize. Economic and family characteristics also moderate this decision, highlighting the weight of security constraints and economic viability. These results suggest that formalization in Morocco constitutes a gradual process, closely linked to the development of human capital and the maturity of entrepreneurial trajectories, rather than a simple change in legal status. The study therefore argues for public policies focused on strengthening educational and entrepreneurial capacities, adapted to the specific realities of the Moroccan informal economy.

Keywords: education; human capital; informal economy; intention to formalize; entrepreneurship.