Informality and Regulations : What Drives Firm Growth? / Era Dabla-Norris, Gabriela Inchauste.

Format:

Book

Government document

Author/Creator:

Dabla-Norris, Era.

Contributor:

Inchauste, Gabriela.

International Monetary Fund. Middle East and Central Asia Department.

IMF Institute.

Series:

IMF Working Papers; Working Paper ; No. 2007/112

IMF Working Papers

Language:

English

Subjects (All):

Informal sector (Economics)--Developing countries.

Informal sector (Economics).

Business enterprises--Developing countries.

Business enterprises.

Physical Description:

1 online resource (28 p.)

Place of Publication:

Washington, D.C. : International Monetary Fund, 2007.

Language Note:

English

Summary:

The paper relies on a rich firm-level data set on transition economies to examine the role of informality as an important channel through which regulatory and other policy constraints affect firm growth. We find that firms reduce their formal operations with a higher tax and regulatory burden, but increase it with better enforcement quality. In terms of firm growth, we find a differential impact of regulatory burden and enforcement quality on formal and informal firms. In particular, we find that growth in formal firms is negatively affected by both tax and financing constraints, while these constraints are insignificant for growth in informal firms. Moreover, formal firm growth improves with better enforcement as measured by fair and impartial courts, while informal firm growth is constrained by organized crime, pointing to their inability to take full advantage of the legal and judicial systems. Finally, when we look at country-wide institutions, we find that higher regulatory burden reduces firm growth. An interactive term between a country-wide measure of the rule of law and a proxy for formality suggests that better enforcement quality dampens the relatively weaker growth in formal firms.

Contents:

Contents; I. Introduction; II. Data and summary statistics; Figures; 1. Distribution of Sales Growth; Tables; 1. Basic Summary Statistics; 2. Distribution of Reported Wage Bill; 2. Correlation Matrix; III. Empirical Strategy and Results; A. Empirical model; B. Results; 3. Determinants of Formality; 4. Determinants of Sales Growth; 5. Determinants of Sales Growth; IV. Concluding Remarks; 6. Determinants of Sales Growth - Institutions; Appendixes; I. Countries in the Sample; II. Variables and Sources; References

Notes:

"May 2007."

"Middle East and Central Asia and IMF Institute."

Includes bibliographical references (p. 25-26).

Description based on print version record.

ISBN:

9786613822246

9781462371976

1462371973

9781452716824

145271682X

9781282557970

1282557971

9781451911299

1451911297