What causes firms to hide output? The determinants of informality

Dabla‐Norris, Era; Gradstein, Mark; Inchauste, Gabriela

doi:10.1016/j.jdeveco.2006.05.007

Cited by 307 publications

(202 citation statements)

References 27 publications

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“…Our firm-level controls include the firm's age, size, and industry dummies, as well as dummies equal to 1 if the firm is owned by the government and if it is an exporter. In line with earlier research (Dabla-Norris, Gradstein, and Inchauste, 2008), we expect formality to increase with firm age and size. Government-owned and exporting firms are expected to be more formal, because their operations are typically well known to tax authorities.…”

Section: Empirical Modelsupporting

confidence: 86%

“…To test whether a stronger legal system reduces the impact of a higher regulatory burden on the incidence of informality, we include an interaction term between the cost of registering property and the rule of law. As in Dabla-Norris, Gradstein, and Inchauste (2008), we find that the negative impact of the regulatory burden on a firm's decision to operate formally is dampened with better enforcement quality ( Table 4, columns 3, 6, 9).…”

Section: Table 4 Determinants Of Formalitysupporting

confidence: 55%

“…3 Dabla-Norris, Gradstein, and Inchauste (2008) also find support for the significance of all these constraints, using a firm-level data set for a large number of countries. However, they focus on hidden sales as the only measure of informality; this paper shows the relevance of these constraints for different proxies of informality.…”

mentioning

confidence: 69%

“…At the same time, there is considerable evidence that the same obstacles are also important determinants of informality (Dabla-Norris, Gradstein, and Inchauste, 2008). The theoretical underpinning for these results is related to the idea that in the absence of effective monitoring and compliance, firms respond to the increased burden of these constraints by moving into the informal sector.…”

mentioning

confidence: 99%

“…particular, of labor (Friedman and others, 2000;Johnson and others, 2000;Botero and others, 2004); and financial development (Straub, 2005). Dabla-Norris, Gradstein, and Inchauste (2008) find support for the significance of all these constraints using a firm-level data set for a large number of countries, but do not examine the relationship among policy constraints, informality, and firm growth. Therefore, even though much work has been separately conducted on how various constraints affect firm growth and informality, few studies examine the role of informality as an important channel through which regulatory and other policy constraints affect firm growth.…”

mentioning

confidence: 99%

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Informality and Regulations: What Drives the Growth of Firms?

Dabla‐Norris¹,

Inchauste²

2008

IMF Staff Pap

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This paper relies on rich firm-level data 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 greater tax and regulatory burdens, but increase them with better enforcement quality. In terms of firm growth, we find a differential impact of regulatory burden and enforcement quality on formal and informal firm growth. In particular, we find that growth in formal firms is negatively affected by both tax and financing constraints, whereas these constraints are insignificant for growth in informal firms. Moreover, formal firm growth improves with better enforcement, while informal firm growth is constrained by organized crime, pointing to informal firms' inability to take full advantage of the legal and judicial systems. Finally, we find that an interaction term between a countrywide measure of the rule of law and formality is positive, suggesting that better rule of law improves formal firm growth.

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Section: Empirical Modelsupporting

confidence: 86%

Section: Table 4 Determinants Of Formalitysupporting

confidence: 55%

mentioning

confidence: 69%

mentioning

confidence: 99%

mentioning

confidence: 99%

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Informality and Regulations: What Drives the Growth of Firms?

Dabla‐Norris¹,

Inchauste²

2008

IMF Staff Pap

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Time to change lanes: How pro‐market reforms affect informal ventures' formalization speed

Weng

Lee

Yamakawa

2021

Global Strategy Journal

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after first online publication: In Section 2.2, the word "increase the costs of maintaining the status quo and" has been deleted in the last paragraph. In Section 3.2, the word "reforms" was changed to "pro-market reforms". In Section 4.3, the word "1 year" has been deleted in the 5th paragraph. In Section 4.4, the word "This variable" was changed to "The information". In Table 3, Inverse Mills ratio Model 1, "À0.022" was changed to "À0.522". Tables 2, 3, and 4 placement has been updated. Figures 1-4 placement has been updated. Sections 5.2.1 to 5.2.4 has been renumbered in this version. In Section 6.1, "venture" has been updated to "economies" in paragraph one and "additional" was changed to "viable" in the second paragraph.]

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Shadow economy threshold effect in the relationship finance–growth in Tunisia: A nonlinear autoregressive distributed lag approach

Mhadhbi

Terzi

2021

J of Intl Development

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This paper tracks the financial growth in Tunisia over the period 1984–2016 with a special focus on the shadow economy. Using Tanzi's measures, we worked on a nonlinear autoregressive distributed lag (NARDL) model to test the impact of the informal economy. The results suggest that the long‐run effect of the financial growth becomes negative if there is a positive change in the shadow economy and the opposite holds. While changes in the shadow economy have no significant influence on the links between financial development and economic growth in the short run, they play a significant role in the Tunisian economy in the long run.

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What causes firms to hide output? The determinants of informality

Cited by 307 publications

References 27 publications

Informality and Regulations: What Drives the Growth of Firms?

Informality and Regulations: What Drives the Growth of Firms?

Time to change lanes: How pro‐market reforms affect informal ventures' formalization speed

Shadow economy threshold effect in the relationship finance–growth in Tunisia: A nonlinear autoregressive distributed lag approach

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