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The impact of regulation on growth and informality - cross-country evidence

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Author Info
Loayza, Norman V.
Oviedo, Ana Maria
Serven, Luis

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Abstract

The authors study the effects of regulation on economic growth and the relative size of the informal sector in a large sample of industrial and developing countries. Along with firm dynamics, informality is an important channel through which regulation affects macroeconomic performance and economic growth in particular. The authors conclude that a heavier regulatory burden-particularly in product and labor markets-reduces growth and induces informality. These effects are, however, mitigated as the overall institutional framework improves.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3623.

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Date of creation: 01 May 2005
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Handle: RePEc:wbk:wbrwps:3623

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Keywords: Governance Indicators; National Governance; Environmental Economics&Policies; Public Sector Economics&Finance; Financial Intermediation;

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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.:
  1. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD, Economics Department. [Downloadable!]
  2. Klarita Gerxhani, 1999. "Informal Sector in Developed and less Developed Countries: A Literature Survey," Tinbergen Institute Discussion Papers 99-083/2, Tinbergen Institute. [Downloadable!]
  3. Friedrich Schneider & Dominik H. Enste, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March. [Downloadable!] (restricted)
  4. Claessens, Stijn & Klapper, Leora F., 2002. "Bankruptcy around the world - explanations of its relative use," Policy Research Working Paper Series 2865, The World Bank. [Downloadable!]
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  5. 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. [Downloadable!] (restricted)
  6. R. Hirschowitz, 1989. "The Other Path: The Invisible Revolution in the Third World," South African Journal of Economics, Economic Society of South Africa, vol. 57(4), pages 266-272, December. [Downloadable!] (restricted)
  7. Klarita Gërxhani, 2004. "The Informal Sector in Developed and Less Developed Countries: A Literature Survey," Public Choice, Springer, vol. 120(3_4), pages 267-300, 09. [Downloadable!]
  8. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July. [Downloadable!] (restricted)
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  9. Loayza, Norman V. & Oviedo, Ana Maria & Serven, Luis, 2005. "Regulation and macroeconomic performance," Policy Research Working Paper Series 3469, The World Bank. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Yelena Kalyuzhnova & Michael Kaser, 2006. "Prudential Management of Hydrocarbon Revenues in Resource-rich Transition Economies," Post-Communist Economies, Taylor and Francis Journals, vol. 18(2), pages 167-187, June. [Downloadable!] (restricted)
  2. Henley, Andrew & Arabsheibani, G. Reza & Carneiro, Francisco G., 2006. "On defining and measuring the informal sector," Policy Research Working Paper Series 3866, The World Bank. [Downloadable!]
    Other versions:
  3. Rita Almeida & Pedro Carneiro, 2007. "Inequality and Employment in a Dual Economy: Enforcement of Labor Regulation in Brazil," IZA Discussion Papers 3094, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Chong, Alberto & Gradstein, Mark, 2006. "Inequality and Informality," CEPR Discussion Papers 5545, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Loayza, Norman V. & Rigolini, Jamele, 2006. "Informality trends and cycles," Policy Research Working Paper Series 4078, The World Bank. [Downloadable!]
  6. Almeida, Rita & Carneiro, Pedro, 2005. "Enforcement of labor regulation, informal labor, and firm performance," Policy Research Working Paper Series 3756, The World Bank. [Downloadable!]
  7. Almeida, Rita & Carneiro, Pedro, 2006. "Enforcement of Regulation, Informal Labour, Firm Size and Firm Performance," CEPR Discussion Papers 5976, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  8. Era Dabla-Norris & Gabriela Inchauste, 2007. "Informality and Regulations: What Drives Firm Growth?," IMF Working Papers 07/112, International Monetary Fund. [Downloadable!]
  9. Rita Almeida & Pedro Carneiro, 2006. "Enforcement of regulation, informal labor and firm performance," CeMMAP working papers CWP02/06, Centre for Microdata Methods and Practice, Institute for Fiscal Studies. [Downloadable!]
    Other versions:
  10. 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 4476, The World Bank. [Downloadable!]
    Other versions:
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