IDEAS home Printed from https://ideas.repec.org/h/eme/rleczz/s0147-9121(2012)0000034006.html
   My bibliography  Save this book chapter

Chapter 3 Who Benefits from Reducing the Cost of Formality? Quantile Regression Discontinuity Analysis

In: Informal Employment in Emerging and Transition Economies

Author

Listed:
  • Tommaso Gabrieli
  • Antonio F. Galvao
  • Gabriel V. Montes-Rojas

Abstract

This chapter studies the effect of increasing formality via tax reduction and simplification schemes on micro-firm performance. We develop a simple theoretical model that yields two intuitive results. First, low- and high-ability entrepreneurs are unlikely to be affected by a tax reduction and therefore, the reduction has an impact only on a segment of the micro-firm population. Second, the benefits to such reduction, as measured by profits and revenues, are increasing in the entrepreneur's ability. Then, we estimate the effect of formality on the entire conditional distribution (quantiles) of revenues using the 1996 Brazilian SIMPLES program and a rich survey of formal and informal micro-firms. The econometric approach compares eligible and non-eligible firms, born before and after SIMPLES in a local interval about the introduction of SIMPLES. We develop an estimator that combines both quantile regression and the regression discontinuity design. The econometric results corroborate the positive effect of formality on micro-firms’ performance and produce a clear characterization of who benefits from these programs.

Suggested Citation

  • Tommaso Gabrieli & Antonio F. Galvao & Gabriel V. Montes-Rojas, 2012. "Chapter 3 Who Benefits from Reducing the Cost of Formality? Quantile Regression Discontinuity Analysis," Research in Labor Economics, in: Hartmut Lehmann & Konstantinos Tatsiramos (ed.), Informal Employment in Emerging and Transition Economies, volume 34, pages 101-133, Emerald Publishing Ltd.
  • Handle: RePEc:eme:rleczz:s0147-9121(2012)0000034006
    as

    Download full text from publisher

    File URL: http://www.emeraldinsight.com/10.1108/S0147-9121(2012)0000034006?utm_campaign=RePEc&WT.mc_id=RePEc
    Download Restriction: Access to full text is restricted to subscribers

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:rleczz:s0147-9121(2012)0000034006. 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: (Charlotte Maiorana). General contact details of provider: http://www.emeraldinsight.com .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.