Increasing Formality and
Productivity of Bolivian Firms

Increasing Formality and Productivity of Bolivian Firms

Bolivia's informal sector is the largest in Latin America, by many definitions and measures. Bolivia's high informality rate has been blamed on many factors including the burden of regulation, the weakness of public institutions, and the...

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Bibliographic Details
Main Author:	World Bank
Format:	Publication
Language:	English
Published:	World Bank 2012
Subjects:	ACCESS TO CAPITAL ACCESS TO CREDIT ACCESS TO FINANCE ACCESS TO FINANCIAL SERVICES ACCESS TO FOREIGN MARKETS ACCESS TO MARKET ADMINISTRATIVE BARRIERS ADVISORY SERVICES AGE OF RETIREMENT ANNUAL INCOME BALANCE SHEET BANK DEPOSIT BANKRUPTCY BANKS BARRIERS TO ENTRY BRANCH BRIBES BUSINESS ASSOCIATIONS BUSINESS DEVELOPMENT BUSINESS ENVIRONMENT BUSINESS SUPPORT BUSINESS TAXES CAPITAL REQUIREMENT CHAMBER OF COMMERCE COLLATERAL COMPANY CONTRACT ENFORCEMENT CONTRIBUTION CONTRIBUTIONS CORRUPTION CREDIT BUREAUS CURRENCY CUSTOMER BASE DEBT DEBT RELIEF DEDUCTIBLE DEMOGRAPHIC GROUPS DEVELOPMENT BANK DISCRIMINATION DOMESTIC MARKET DOMESTIC WORKERS EARNINGS ECONOMIC COOPERATION ECONOMIC GROWTH ECONOMIC REFORMS ECONOMIES OF SCALE EDUCATION LEVELS EMPLOYEE EMPLOYERS EMPLOYMENT ENFORCEABILITY OF CONTRACTS ENTREPRENEUR ENTREPRENEURS EXPANSION EXTERNALITIES FACILITATION FAMILIES FAMILY INCOME FAMILY MEMBERS FAMILY RESPONSIBILITIES FEMALE ENTREPRENEURS FINANCIAL ENVIRONMENT FINANCIAL INSTRUMENTS FINANCIAL SECTOR FINANCIAL SERVICES FINANCIAL SUPPORT FIRM LEVEL FIRM SIZE FIRMS FISCAL RESOURCES FORMAL ECONOMY FORMAL LABOR MARKET FUND MANAGEMENT GENDER GENDER DIFFERENCES GROUPS OF PEOPLE HEALTH INSURANCE HOUSEHOLD SURVEYS HOUSEHOLDS HUMAN CAPITAL INCOME DISTRIBUTION INCOME INEQUALITY INCOME TAX INCOMES INDUSTRY CHARACTERISTICS INEQUALITY INFORMAL EMPLOYMENT INFORMAL SECTOR INFORMAL WORKERS INPUT PRICES INSURANCE INTEREST RATES INTERNATIONAL BANK JOB OPPORTUNITIES JOBS LABOR CONTRACT LABOR CONTRACTS LABOR FORCE LABOR LAWS LABOR MARKET LABOR MARKET SEGMENTATION LABOR ORGANIZATION LABOR REGULATION LABOR REGULATIONS LACK OF INFORMATION LACK OF KNOWLEDGE LARGE ENTERPRISES LARGE FIRMS LAWS LAWYER LAWYERS LEVEL OF EDUCATION LIABILITY LICENSING LIMITED ACCESS LOCAL FIRMS LOW COST LOW ENTRY BARRIERS MARRIED WOMEN MEDIUM ENTERPRISES MICRO ENTERPRISES MICROCREDIT MICROFINANCE MIGRATION MUNICIPAL GOVERNMENTS MUNICIPALITIES NEW BUSINESS NEW ENTRANTS NONGOVERNMENTAL ORGANIZATION OCCUPATION OLDER WORKERS PENALTIES PENSION PENSION FUND PENSION FUNDS PENSION RIGHTS PENSION SYSTEM PENSION SYSTEMS PRIMARY SCHOOL PRIVATE COSTS PRIVATE EMPLOYMENT PRIVATE FIRMS PRIVATE INSTITUTIONS PRIVATE SECTOR PRIVATIZATIONS PRODUCT MARKET PRODUCT MARKET REGULATION PRODUCT MARKETS PRODUCTION PROCESS PRODUCTIVE SECTOR PRODUCTIVITY PRODUCTIVITY GROWTH PROFITABILITY PROPERTY RIGHTS PUBLIC AGENCIES PUBLIC EDUCATION PUBLIC EMPLOYMENT PUBLIC GOODS PUBLIC POLICY PUBLIC SECTOR EMPLOYEES PUBLIC SECTOR EMPLOYMENT PUBLIC SERVICES PURCHASES RATES OF RETURN REAL ESTATE RECEIPTS RED TAPE REGISTRATION PROCESS REGULATORY BURDEN REGULATORY BURDENS RETIRED RETIREMENT RETIREMENT PENSION RURAL EMPLOYMENT SALARIED EMPLOYMENT SALARIED WORKERS SALARIES SAVINGS SECONDARY EDUCATION SELF-EMPLOYMENT SIZE OF FIRM SKILLED LABOR SMALL BUSINESSES SMALL ENTERPRISES SMALL ENTREPRENEURS SMALL FIRMS SMALLER FIRMS SUBSIDIARY SUPPLIER SUPPLY OF CREDIT TAX ADMINISTRATION TAX BURDEN TAX COLLECTION TAX RATES TAX REGIME TAX REGIMES TAXATION TECHNICAL ASSISTANCE TOTAL COST TOTAL EMPLOYMENT TOTAL FACTOR PRODUCTIVITY TRAINING SERVICES TRANSACTION TRANSPORT UNEMPLOYED URBAN AREAS URBAN EMPLOYMENT URBAN WORKERS URBANIZATION VULNERABLE GROUPS WAGE WORKER YOUNG PEOPLE
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000333037_20090916013154 http://hdl.handle.net/10986/2675

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Summary:	Bolivia's informal sector is the largest in Latin America, by many definitions and measures. Bolivia's high informality rate has been blamed on many factors including the burden of regulation, the weakness of public institutions, and the lack of perceived benefits to being formal. The high level of informality has a number of negative implications related to for low productivity, low growth, and low quality of jobs. This study presents fresh qualitative and quantitative analyses to better understand the reasons why firms are informal and the impact of formalization on their profitability, in order to inform policy actions appropriate to the reality of Bolivia. The crucial finding of the analysis is that the impact of tax registration on profitability depends on firm size and the ability to issue tax receipts. The smallest and the largest firms in the sample have lower profits as a result of tax registration because their cost of formalizing exceeds benefits. Firms in the middle range (two to five employees) benefit from tax registration in large part due to increasing the customer base by issuing tax receipts. The study presents a set of prioritized policy implications for policy makers. In the short term, the first priority should be to increase the benefits of formalization through training, access to credit and markets, and business support. The second priority is to increase information on how to formalize and its benefits. In the medium term, the priority is to simplify formalization, regulatory, and taxation procedures and to reduce their costs. Increasing even-handed enforcement of taxation and regulation is also important but not a priority for micro and small firms. Measures to boost the productivity of micro and small firms in general will help overall economic growth, employment, and formalization.

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