Advanced Search
MyIDEAS: Login to save this article or follow this journal

The impact of formality on firm profitability in Bolivia: an heterogeneous assessment

Contents:

Author Info

  • Ugarte, Darwin

    ()
    (Economics School of Louvain)

Registered author(s):

    Abstract

    Recent evidence suggests that formality improves micro-firms profits in Bolivia. This gain is only for firms with 2 to 5 workers, while smaller and larger firms would lose out by formalizing (McKenzie and Sakho, 2010). However, as much of the empirical literature on this topic, the estimations are based on strong assumptions about unobservables. If the returns to formality vary among firms and these variations influence selection into formality, traditional estimators are biased (Heckman and Vytlacil, 2007). In this paper we consider these elements to estimate the heterogeneous effects of formality on firm profits in Bolivia. We find remarkable heterogeneity in the returns to formality, from -3% to 6%. The group of firms with positive marginal effects from formality corresponds to those which are most likely to register. We also characterize the firms that likely benefit from having a formal status. These would correspond to large firms which work at big scales.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.iisec.ucb.edu.bo/journal/articulos/1702.pdf
    File Function: Full text
    Download Restriction: no

    Bibliographic Info

    Article provided by Instituto de Investigaciones Socio-Económicas (IISEC), Universidad Católica Boliviana in its journal Revista Latinoamericana de Desarrollo Economico.

    Volume (Year): (2012)
    Issue (Month): 17 (Mayo)
    Pages: 53-74

    as in new window
    Handle: RePEc:ris:revlde:1702

    Contact details of provider:
    Postal: Universidad católica Boliviana San Pablo, Instituto de Investigaciones Socio Económicas, Av. 14 de septiembre 4807. Obrajes, La Paz, Bolivia
    Phone: (591-2) 784159
    Fax: (591-2) 786707
    Email:
    Web page: http://www.iisec.ucb.edu.bo
    More information through EDIRC

    Related research

    Keywords: Informal Sectors; Tax Registration; Heterogeneous treatment effects;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Bruhn, Miriam, 2008. "License to sell : the effect of business registration reform on entrepreneurial activity in Mexico," Policy Research Working Paper Series 4538, The World Bank.
    2. Kaplan, David S. & Piedra, Eduardo & Seira, Enrique, 2011. "Entry regulation and business start-ups: Evidence from Mexico," Journal of Public Economics, Elsevier, vol. 95(11), pages 1501-1515.
    3. McKenzie, David & Sakho, Yaye Seynabou, 2007. "Does It Pay Firms to Register for Taxes? The Impact of Formality on Firm Profitability," IZA Discussion Papers 3179, Institute for the Study of Labor (IZA).
    4. David Kaplan & Eduardo Piedra & Enrique Seira, 2007. "Are Burdensome Registration Procedures an Important Barrier on Firm Creation? Evidence from Mexico," Working Papers 0701, Centro de Investigacion Economica, ITAM.
    5. Gaaitzen De Vries, 2010. "Small Retailers in Brazil: Are Formal Firms Really More Productive?," Journal of Development Studies, Taylor & Francis Journals, vol. 46(8), pages 1345-1366.
    6. Fajnzylber, Pablo & Maloney, William F. & Montes-Rojas, Gabriel V., 2011. "Does formality improve micro-firm performance? Evidence from the Brazilian SIMPLES program," Journal of Development Economics, Elsevier, vol. 94(2), pages 262-276, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:ris:revlde:1702. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tirza July Aguilar Salas).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.