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Social capital as a substitute for formality: Evidence from Bolivia

Listed author(s):
  • Annen, Kurt

The paper studies the role of social capital in the urban informal sector in Bolivia. It shows that a formal firm has about 6.4 times the sales of an informal firm with no social capital, but informal firms use their social capital to compensate for the lack of formal productivity benefits. By being formal, firms obtain permanent visibility because they can operate a shop or a visible production location and they can produce in locations with better public infrastructure. Informal firms, in contrast, sell in one place – typically in street markets in front of formal shops – and produce in another — typically in the outskirts. Social capital increases accessibility of informal firms and provides them with security benefits at their production location.

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File URL: http://www.sciencedirect.com/science/article/pii/S0176268013000281
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Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 31 (2013)
Issue (Month): C ()
Pages: 82-92

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Handle: RePEc:eee:poleco:v:31:y:2013:i:c:p:82-92
DOI: 10.1016/j.ejpoleco.2013.04.002
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505544

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  1. Kurt Annen, 2001. "Inclusive and Exclusive Social Capital in the Small-Firm Sector in Developing Countries," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 157(2), pages 319-319, June.
  2. Axel Dreher & Christos Kotsogiannis & Steve McCorriston, 2009. "How do institutions affect corruption and the shadow economy?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(6), pages 773-796, December.
  3. Timothy Besley & Torsten Persson, 2009. "The Origins of State Capacity: Property Rights, Taxation, and Politics," American Economic Review, American Economic Association, vol. 99(4), pages 1218-1244, September.
  4. Marcel Fafchamps, 2006. "Development and social capital," Journal of Development Studies, Taylor & Francis Journals, vol. 42(7), pages 1180-1198.
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