What Causes Firms to Hide Output? The Determinants of Informality

 
Author/Editor: Dabla-Norris, Era ; Gradstein, Mark ; Inchauste, Gabriela
 
Publication Date: August 01, 2005
 
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Summary: In many developing countries, a significant part of economic activity takes place in the informal sector. Earlier work has examined the determinants of the size of the informal sector, focusing separately on factors such as tax and regulation burden, financial market development, and the quality of the legal system. We revisit this issue by using an integrated dataset which contains rich information on all these aspects. Testing the channels affecting the degree of informality, we find evidence that all previously identified factors indeed play a role in driving informality. In particular, and consistent with the suggested theoretical model, we find support for the significance of the quality of the legal system.
 
Series: Working Paper No. 05/160
Subject(s): Economic models | Production

Author's Keyword(s): Informal sector | determinants | institution
 
English
Publication Date: August 01, 2005
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA2005160 Pages: 33
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