Technological change, the productivity of formal and informal businesses, and the impact on labor market

Digital transformation, both omnipresent and influential, has deeply influenced various sectors with a significant focus on the economy. The introduction and acceptance of tools that facilitate technological change and online business practices have surfaced as game-changers. They have endowed corporations with enhanced internal agility and improved employee communication. Online business, with its vast potential, is increasingly crucial in developing countries, where Internet accessibility is steadily growing. This study explores the impact of online business on company productivity by considering both formal and informal sectors. It leveraged data from the 2018 General Business Census of Togo. By applying endogenous switching regression and the smoothed instrumental variable quantile regression techniques, this study shows that online businesses can significantly increase productivity, particularly in firms within the informal sector. However, this finding highlights the possible risk of job loss. Supporting strategies are essential for promoting the integration of online companies, increasing productivity, and protecting jobs.