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Informality : Exit and Exclusion

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Author Info

  • Guillermo E. Perry
  • William F. Maloney
  • Omar S. Arias
  • Pablo Fajnzylber
  • Andrew D. Mason
  • Jaime Saavedra-Chanduvi

Abstract

Informality: exit and exclusion analyzes informality in Latin America, exploring root causes and reasons for and implications of its growth. The authors use two distinct but complementary lenses: informality driven by exclusion from state benefits or the circuits of the modern economy, and driven by voluntary 'exit' decisions resulting from private cost-benefit calculations that lead workers and firms to opt out of formal institutions. They find both lenses have considerable explanatory power to understand the causes and consequences of informality in the region. Informality: exit and exclusion concludes that reducing informality levels and overcoming the 'culture of informality' will require actions to increase aggregate productivity in the economy, reform poorly designed regulations and social policies, and increase the legitimacy of the state by improving the quality and fairness of state institutions and policies. Although the study focuses on Latin America, its analysis, approach, and conclusions are relevant for all developing countries.

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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 6730 and published in 2007.

ISBN: 0-8213-7092-8
Handle: RePEc:wbk:wbpubs:6730

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Postal: 1818 H Street, N.W., Washington, DC 20433
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Web page: https://openknowledge.worldbank.org
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Related research

Keywords: Social Protections and Labor - Labor Markets Banks and Banking Reform Social Protections and Labor - Labor Standards Work and Working Conditions Tertiary Education Finance and Financial Sector Development Education;

References

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  1. Benno Torgler, 2003. "Tax Morale in Latin America," Working papers 2003/03, Faculty of Business and Economics - University of Basel.
  2. Ke-young Chu & Hamid Reza Davoodi & Sanjeev Gupta, 2000. "Income Distribution and Tax and Government Social Spending Policies in Developing Countries," IMF Working Papers 00/62, International Monetary Fund.
  3. Eduardo M.R.A. Engel & Alexander Galetovic & Claudio E. Raddatz, 1998. "Taxes and Income Distribution in Chile: Some Unpleasant Redistributive Arithmetic," NBER Working Papers 6828, National Bureau of Economic Research, Inc.
  4. Eduardo Lora, 2008. "El futuro de los pactos fiscales en América Latina," Research Department Publications 4614, Inter-American Development Bank, Research Department.
  5. James Alm & Benno Torgler, 2004. "Culture Differences and Tax Morale in the United States and in Europe," CREMA Working Paper Series 2004-14, Center for Research in Economics, Management and the Arts (CREMA).
  6. Loayza, Norman V. & Rigolini, Jamele, 2006. "Informality trends and cycles," Policy Research Working Paper Series 4078, The World Bank.
  7. Chu, K.-y. & Davoodi, H. & Gupta, S., 2000. "Income Distribution and Tax, and Government Social Spending Policies in Developing Countries," Research Paper 214, World Institute for Development Economics Research.
  8. Saul D. Hoffman & Laurence S. Seidman, 2003. "Helping Working Families: The Earned Income Tax Credit," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number hwf.
  9. Tanzi, Vito & Zee, Howell H., 2000. "Tax Policy for Emerging Markets: Developing Countries," National Tax Journal, National Tax Association, vol. 53(n. 2), pages 299-322, June Cita.
  10. Richard M. Bird & Eric M. Zolt, 2014. "Redistribution via Taxation: The Limited Role of the Personal Income Tax in Developing Countries," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 625-683, November.
  11. Loayza, Norman V. & Oviedo, Ana Maria & Serven, Luis, 2005. "The impact of regulation on growth and informality - cross-country evidence," Policy Research Working Paper Series 3623, The World Bank.
  12. Jorge Martinz-Vazquez & Benno Torgler, 2005. "The Evolution of Tax Morale in Modern Spain," CREMA Working Paper Series 2005-33, Center for Research in Economics, Management and the Arts (CREMA).
  13. James Alm & Jorge Martinez-Vazquez, 2007. "Tax Morale and Tax Evasion in Latin American Countries," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0732, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  14. Chong, Alberto & Gradstein, Mark, 2006. "Inequality and Informality," CEPR Discussion Papers 5545, C.E.P.R. Discussion Papers.
  15. James Alm & Jorge Martinez-Vazquez, 2007. "Tax Morale and Tax Evasion in Latin America," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0704, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  16. World Bank, 2005. "World Development Indicators 2005," World Bank Publications, The World Bank, number 12426, March.
  17. 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, vol. 45(1), pages 129-162, December.
  18. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," NBER Working Papers 7580, National Bureau of Economic Research, Inc.
  19. Grasmick, Harold G. & Scott, Wilbur J., 1982. "Tax evasion and mechanisms of social control: A comparison with grand and petty theft," Journal of Economic Psychology, Elsevier, vol. 2(3), pages 213-230, September.
  20. Alm, James & Sanchez, Isabel & de Juan, Ana, 1995. "Economic and Noneconomic Factors in Tax Compliance," Kyklos, Wiley Blackwell, vol. 48(1), pages 3-18.
  21. Howell H. Zee & Vito Tanzi, 2000. "Tax Policy for Emerging Markets - Developing Countries," IMF Working Papers 00/35, International Monetary Fund.
  22. Suzanne Duryea & Analía Olgiati & Leslie Stone, 2006. "The Under-Registration of Births in Latin America," Research Department Publications 4443, Inter-American Development Bank, Research Department.
  23. Frank A. Cowell, 1990. "Cheating the Government: The Economics of Evasion," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262532484, January.
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