{
  "title": "Informality and Regulations: What Drives Firm Growth?",
  "publication": "IMF Working Papers, May 1, 2007",
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  "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.",
  "sections": [
    {
      "heading": "Summary findings",
      "content": "- 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.\n- Firms reduce their formal operations with a higher tax and regulatory burden, but increase formal operations with better enforcement quality.\n- Growth in formal firms is negatively affected by both tax and financing constraints, while these constraints are insignificant for growth in informal firms.\n- Formal firm growth improves with better enforcement as measured by fair and impartial courts.\n- Informal firm growth is constrained by organized crime, pointing to informal firms' inability to take full advantage of the legal and judicial systems.\n- At the country-wide level, higher regulatory burden reduces firm growth.\n- 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."
    },
    {
      "heading": "Firm-level impacts and mechanisms",
      "content": "- Regulatory and tax burden:\n  - Higher tax and regulatory burden → firms reduce formal operations.\n  - Higher tax and regulatory burden → negative effect on growth of formal firms.\n  - For informal firms, tax and financing constraints are reported as insignificant for growth.\n- Enforcement quality:\n  - Better enforcement quality → firms increase formal operations.\n  - Fair and impartial courts → positive effect on formal firm growth.\n  - Organized crime → constrains informal firm growth.\n- Financing constraints:\n  - Identified as negatively affecting growth of formal firms; insignificant for informal firms."
    },
    {
      "heading": "Country-wide institutions and interactions",
      "content": "- Higher regulatory burden at the country level reduces firm growth.\n- Interaction: a country-wide measure of the rule of law interacted with a proxy for formality indicates better enforcement quality dampens the relatively weaker growth observed in formal firms.\n\n---\n\n Content in this bundle\n\n- Appendix I. Countries in the Sample\n  - Appendix I. Countries in the Sample (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Appendix I. Countries in the Sample (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/informality-and-regulations-what-drives-firm-growth-20666"
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    "Authors: Era Dabla-Norris, Gabriela Inchauste",
    "Published: May 1, 2007",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451866766.001",
    "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.",
    "Firms reduce their formal operations with a higher tax and regulatory burden, but increase formal operations with better enforcement quality.",
    "Growth in formal firms is negatively affected by both tax and financing constraints, while these constraints are insignificant for growth in informal firms.",
    "Formal firm growth improves with better enforcement as measured by fair and impartial courts.",
    "Informal firm growth is constrained by organized crime, pointing to informal firms' inability to take full advantage of the legal and judicial systems.",
    "At the country-wide level, 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.",
    "Regulatory and tax burden:",
    "Enforcement quality:",
    "Financing constraints:",
    "Higher regulatory burden at the country level reduces firm growth.",
    "Interaction: a country-wide measure of the rule of law interacted with a proxy for formality indicates better enforcement quality dampens the relatively weaker growth observed in formal firms.",
    "**Appendix I. Countries in the Sample**"
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