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Firms, Informality, and Development: Theory and Evidence from Brazil

Ulyssea, G; (2018) Firms, Informality, and Development: Theory and Evidence from Brazil. American Economic Review , 108 (8) pp. 2015-2047. 10.1257/aer.20141745. Green open access

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Abstract

This paper develops and estimates an equilibrium model where heterogeneous firms can exploit two margins of informality: (i) not register their business, the extensive margin; and (ii) hire workers "off the books," the intensive margin. The model encompasses the main competing frameworks for understanding informality and provides a natural setting to infer their empirical relevance. The counterfactual analysis shows that once the intensive margin is accounted for, firm and labor informality need not move in the same direction as a result of policy changes. Lower informality can be, but is not necessarily associated with higher output, TFP, or welfare.

Type: Article
Title: Firms, Informality, and Development: Theory and Evidence from Brazil
Open access status: An open access version is available from UCL Discovery
DOI: 10.1257/aer.20141745
Publisher version: https://doi.org/10.1257/aer.20141745
Language: English
Additional information: This version is the version of record. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: Social Sciences, Economics, Business & Economics, LABOR REGULATION, ENTRY REGULATION, JOB CREATION, SECTOR, SIZE, PRODUCTIVITY, TAXATION, ENFORCEMENT, INDUSTRY, POLICY
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/10131617
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