Informality and Regulations: What Drives the Growth of Firms?
This paper relies on rich firm-level data on transition economies to examine the role of informality as an important channel through which regulatory and other policy constraints affect firm growth. We find that firms reduce their formal operations with greater tax and regulatory burdens, but increase them with better enforcement quality. In terms of firm growth, we find a differential impact of regulatory burden and enforcement quality on formal and informal firm growth. In particular, we find that growth in formal firms is negatively affected by both tax and financing constraints, whereas these constraints are insignificant for growth in informal firms. Moreover, formal firm growth improves with better enforcement, while informal firm growth is constrained by organized crime, pointing to informal firms' inability to take full advantage of the legal and judicial systems. Finally, we find that an interaction term between a countrywide measure of the rule of law and formality is positive, suggesting that better rule of law improves formal firm growth. IMF Staff Papers (2008) 55, 50–82; doi:10.1057/palgrave.imfsp.9450030; published online 22 January 2008
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 55 (2008)
Issue (Month): 1 (April)
|Contact details of provider:|| Web page: http://www.palgrave-journals.com/|
|Order Information:|| Postal: Palgrave Macmillan Journals, Subscription Department, Houndmills, Basingstoke, Hampshire RG21 6XS, UK|
Web: http://www.palgrave-journals.com/pal/subscribe/index.html Email:
When requesting a correction, please mention this item's handle: RePEc:pal:imfstp:v:55:y:2008:i:1:p:50-82. 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: (Daniel Foley)
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.