Bureaucracy, Costs, and Information Gaps as Bottlenecks to Formalization: Evidence and Policy Implications for Informal Markets in Lubango, Huíla, Angola

This study investigates key institutional barriers preventing informal market actors from transitioning into the formal economy in Sub-Saharan Africa, with evidence from Lubango, Angola. Drawing on a cross-sectional survey of 300 informal traders across three major markets, the study examines how bureaucratic complexity, regulatory compliance costs, and informational deficits influence formalization intentions. Using a quantitative analytical framework grounded in dualist, structuralist, and legalist perspectives, the study employs multiple linear regression, non-parametric tests, and descriptive statistics to evaluate both direct and moderated effects of formalization barriers. Results indicate that bureaucratic complexity (β = −0.34, p < 0.001) and compliance costs (β = −0.28, p < 0.001) are the strongest negative predictors of formalization intention, while information constraints exert a smaller but statistically significant effect (β = −0.18, p < 0.05). Moderation analysis reveals that women experience significantly stronger negative effects of bureaucratic barriers, while the effect of information constraints varies by education level in a direction contrary to the initial theoretical expectation. The study contributes empirical evidence from a Lusophone African context and highlights the importance of institutional accessibility in formalization policy design. Findings suggest that effective formalization strategies must prioritize procedural simplification, targeted support for vulnerable groups, and context-sensitive institutional reforms. The results have implications for Angola’s broader formalization agenda and for formalization strategies in Sub-Saharan Africa.