What Causes Firms to Hide Output? the Determinants of Informality

By Gabriela Inchauste, Mark Gradstein, Era Dabla-Norris

August 1, 2005

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Format: Chicago

Gabriela Inchauste, Mark Gradstein, and Era Dabla-Norris. What Causes Firms to Hide Output? the Determinants of Informality, (USA: International Monetary Fund, 2005) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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.

Subject: Corruption, Credit, Financial sector development, Legal support in revenue administration, Productivity

Keywords: Firm, Firm age, WP

Publication Details

Pages:

33
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/160
Stock No:

WPIEA2005160
ISBN:

9781451861792
ISSN:

1018-5941

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