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Economic Informality : Causes, Costs, and Policies - A Literature Survey

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  • Ana Maria Oviedo
  • Mark R. Thomas
  • Kamer Karakurum-Ozdemir
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    Abstract

    In this survey the author assemble recent theoretical and empirical advances in the literature on economic informality, analyzing the causes and costs of informality in developed and developing economies. In accordance with recent evidence, the author discusses the nature and the roots of informal economic activity across countries distinguishing between informality as the result of 'exclusion' and 'exit.' The author then provides an extensive review of recent international experience with policies aimed at reducing informality, in particular policies that facilitate the formalization process, create a framework for the transition from informality to formality, lend support to newly created firms, reduce or eliminate inconsistencies across regulation and government agencies, increase information flows, and increase enforcement.

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    File URL: https://openknowledge.worldbank.org/bitstream/handle/10986/5917/503600PUB0Box3101OFFICIAL0USE0ONLY1.pdf?sequence=1
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    Bibliographic Info

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    This book is provided by The World Bank in its series World Bank Publications with number 5917 and published in 2009.

    ISBN: 978-0-8213-7996-7
    Handle: RePEc:wbk:wbpubs:5917

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    Postal: 1818 H Street, N.W., Washington, DC 20433
    Phone: (202) 477-1234
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    Web page: https://openknowledge.worldbank.org
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    Related research

    Keywords: Social Protections and Labor - Labor Markets Social Protections and Labor - Labor Policies Macroeconomics and Economic Growth - Economic Theory & Research Finance and Financial Sector Development - Access to Finance;

    References

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    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.:
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    1. Bosch, Mariano & Maloney, William F., 2008. "Cyclical Movements in Unemployment and Informality in Developing Countries," IZA Discussion Papers, Institute for the Study of Labor (IZA) 3514, Institute for the Study of Labor (IZA).
    2. Fugazza, Marco & Jacques, Jean-Francois, 2004. "Labor market institutions, taxation and the underground economy," Journal of Public Economics, Elsevier, Elsevier, vol. 88(1-2), pages 395-418, January.
    3. Albrecht, James & Navarro, Lucas & Vroman, Susan, 2006. "The Effects of Labor Market Policies in an Economy with an Informal Sector," IZA Discussion Papers, Institute for the Study of Labor (IZA) 2141, Institute for the Study of Labor (IZA).
    4. Blanchard, Olivier J & Giavazzi, Francesco, 2001. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labour Markets," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2713, C.E.P.R. Discussion Papers.
    5. Blanchflower, D.G. & Oswald, A., 1991. "What Makes an Entrepreneur?," Economics Series Working Papers, University of Oxford, Department of Economics 99125, University of Oxford, Department of Economics.
    6. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers, Centre for Economic Performance, LSE dp0110, Centre for Economic Performance, LSE.
    7. Torgler, Benno & Schneider, Friedrich, 2007. "Shadow Economy, Tax Morale, Governance and Institutional Quality: A Panel Analysis," IZA Discussion Papers, Institute for the Study of Labor (IZA) 2563, Institute for the Study of Labor (IZA).
    8. David Kaplan & Eduardo Piedra & Enrique Seira, 2006. "Are Burdensome Registration Procedures an Important Barrier on Firm Creation? Evidence from Mexico," Discussion Papers, Stanford Institute for Economic Policy Research 06-013, Stanford Institute for Economic Policy Research.
    9. Aureo de Paula & Jose A. Scheinkman, 2006. "The Informal Sector," Levine's Bibliography, UCLA Department of Economics 122247000000001030, UCLA Department of Economics.
    10. Klarita G�rxhani, 2004. "The Informal Sector in Developed and Less Developed Countries: A Literature Survey," Public Choice, Springer, Springer, vol. 120(3_4), pages 267-300, 09.
    11. Mauricio Cárdenas & Sandra Rozo V. & contacto@fedesarrollo.org.co, 2007. "La informalidad empresarial y sus consecuencias: ¿Son los CAE una solución?," WORKING PAPERS SERIES. DOCUMENTOS DE TRABAJO, FEDESARROLLO 009191, FEDESARROLLO.
    12. Loayza, Norman V., 1996. "The economics of the informal sector: a simple model and some empirical evidence from Latin America," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 45(1), pages 129-162, December.
    13. Kaplan, David S. & Piedra, Eduardo & Seira, Enrique, 2007. "Entry regulation and business start-ups : evidence from Mexico," Policy Research Working Paper Series, The World Bank 4322, The World Bank.
    14. Lucas Ronconi, 2010. "Enforcement and Compliance with Labor Regulations," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, ILR Review, Cornell University, ILR School, vol. 63(4), pages 719-736, July.
    15. Bruhn, Miriam, 2008. "License to sell : the effect of business registration reform on entrepreneurial activity in Mexico," Policy Research Working Paper Series, The World Bank 4538, The World Bank.
    16. Kenyon, Thomas, 2007. "A framework for thinking about enterprise formalization policies in developing countries," Policy Research Working Paper Series, The World Bank 4235, The World Bank.
    17. McKenzie, David & Sakho, Yaye Seynabou, 2007. "Does It Pay Firms to Register for Taxes? The Impact of Formality on Firm Profitability," IZA Discussion Papers, Institute for the Study of Labor (IZA) 3179, Institute for the Study of Labor (IZA).
    18. Loayza, Norman V. & Rigolini, Jamele, 2006. "Informality trends and cycles," Policy Research Working Paper Series, The World Bank 4078, The World Bank.
    19. World Bank, 2007. "Economic Performance in Latin America and the Caribbean : A Microeconomic Perspective," World Bank Other Operational Studies, The World Bank 7857, The World Bank.
    20. Gatti, Roberta & Honorati, Maddalena, 2008. "Informality among formal firms : firm-level, cross-country evidence on tax compliance and access to credit," Policy Research Working Paper Series, The World Bank 4476, The World Bank.
    21. Trevor Breusch, 2005. "Estimating the Underground Economy using MIMIC Models," Econometrics, EconWPA 0507003, EconWPA, revised 25 Jul 2005.
    22. Johannes P. Jütting & Jante Parlevliet & Theodora Xenogiani, 2008. "Informal Employment Re-loaded," OECD Development Centre Working Papers, OECD Publishing 266, OECD Publishing.
    23. Pablo Fajnzylber & William Maloney & Gabriel Montes Rojas, 2006. "Microenterprise Dynamics in Developing Countries: How Similar are They to Those in the Industrialized World? Evidence from Mexico," World Bank Economic Review, World Bank Group, World Bank Group, vol. 20(3), pages 389-419.
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