IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/3623.html

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

Author

Listed:
  • Loayza, Norman V.
  • Oviedo, Ana Maria
  • Serven, Luis

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.

Suggested Citation

  • 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.
    • Handle: RePEc:wbk:wbrwps:3623
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2005/06/06/000012009_20050606113300/Rendered/PDF/wps36230rev.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    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 Publishing.
    2. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1203-1250.
    3. Stijn Claessens & Leora F. Klapper, 2005. "Bankruptcy around the World: Explanations of Its Relative Use," American Law and Economics Review, American Law and Economics Association, vol. 7(1), pages 253-283.
    4. Loayza, Norman V. & Oviedo, Ana Maria & Serven, Luis, 2005. "Regulation and macroeconomic performance," Policy Research Working Paper Series 3469, The World Bank.
    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.
    6. R. Hirschowitz, 1989. "The Other Path: The Invisible Revolution in the Third World1," South African Journal of Economics, Economic Society of South Africa, vol. 57(4), pages 266-272, December.
    7. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
    8. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
    9. 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, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Almeida, Rita K. & Carneiro, Pedro, 2005. "Enforcement of Regulation, Informal Labor and Firm Performance," IZA Discussion Papers 1759, Institute of Labor Economics (IZA).
    3. Norman Loayza, 2007. "The causes and consequences of informality in Peru," Working Papers 2007-018, Banco Central de Reserva del Perú.
    4. Loayza, Norman V. & Oviedo, Ana Maria & Serven, Luis, 2005. "Regulation and macroeconomic performance," Policy Research Working Paper Series 3469, The World Bank.
    5. Loayza, Norman V. & Serven, Luis & Sugawara, Naotaka, 2009. "Informality in Latin America and the Caribbean," Policy Research Working Paper Series 4888, The World Bank.
    6. Loayza, Norman, 2008. "Causas y consecuencias de la informalidad en el Perú," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 15, pages 43-64.
    7. Friedrich Schneider & Robert Klinglmair, 2004. "Shadow economies around the world: what do we know?," Economics working papers 2004-03, Department of Economics, Johannes Kepler University Linz, Austria.
    8. Dossè Mawussi DJAHINI-AFAWOUBO, 2023. "Niveau d’éducation et probabilité d’être employé dans le secteur informel au Togo," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 57, pages 29-48.
    9. Dreher, Axel & Kotsogiannis, Christos & McCorriston, Steve, 2007. "Corruption around the world: Evidence from a structural model," Journal of Comparative Economics, Elsevier, vol. 35(3), pages 443-466, September.
    10. D’Hernoncourt, Johanna & Méon, Pierre-Guillaume, 2012. "The not so dark side of trust: Does trust increase the size of the shadow economy?," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 97-121.
    11. Elena D’Agostino & Marco Alberto De Benedetto & Giuseppe Sobbrio, 2023. "Does the economic freedom hinder the underground economy? Evidence from a cross-country analysis," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(1), pages 319-341, April.
    12. Sena Kimm Gnangnon, 2023. "Effect of the Shadow Economy on Tax Reform in Developing Countries," Economies, MDPI, vol. 11(3), pages 1-49, March.
    13. Andreas Buhn & Alexander Karmann & Friedrich Schneider, 2007. "Size and Development of the Shadow Economy and of Do-it-Yourself Activities: The Case of Germany," CREMA Working Paper Series 2007-14, Center for Research in Economics, Management and the Arts (CREMA).
    14. Buehn, Andreas & Schneider, Friedrich, 2009. "Corruption and the Shadow Economy: A Structural Equation Model Approach," IZA Discussion Papers 4182, Institute of Labor Economics (IZA).
    15. Berdiev, Aziz N. & Saunoris, James W., 2025. "Navigating the shadows: Exploring the interaction between social progress and the shadow economy," World Development, Elsevier, vol. 192(C).
    16. Zenou, Yves, 2008. "Job search and mobility in developing countries. Theory and policy implications," Journal of Development Economics, Elsevier, vol. 86(2), pages 336-355, June.
    17. McKenzie, David & Seynabou Sakho, Yaye, 2010. "Does it pay firms to register for taxes? The impact of formality on firm profitability," Journal of Development Economics, Elsevier, vol. 91(1), pages 15-24, January.
    18. Aureo de Paula & Jose A. Scheinkman, 2006. "The Informal Sector," Levine's Bibliography 122247000000001030, UCLA Department of Economics.
    19. Ricardo Azevedo Araujo & Helmar Nunes Moreira, 2014. "Lyapunov stability in an evolutionary game theory model of the labour market," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 15(1), pages 41-53.
    20. Rand, John & Torm, Nina, 2012. "The Benefits of Formalization: Evidence from Vietnamese Manufacturing SMEs," World Development, Elsevier, vol. 40(5), pages 983-998.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:wbk:wbrwps:3623. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.