Casting a Shadow : Productivity of Formal Firms and Informality
Using firm-level survey data for a large cross section of countries, the paper assesses the gap in labor productivity between formal and informal firms in developing countries for which comparable data are available. It also investigates the impact...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/116331563818341148/Casting-a-Shadow-Productivity-of-Formal-Firms-and-Informality http://hdl.handle.net/10986/32129 |
| Summary: | Using firm-level survey data for a large
cross section of countries, the paper assesses the gap in
labor productivity between formal and informal firms in
developing countries for which comparable data are
available. It also investigates the impact of competition
from informal firms on the labor productivity of formal
firms. The results show that on average, the labor
productivity of informal firms is about one-fourth that of
formal firms. Moreover, the labor productivity of formal
firms that face competition from informal firms is about 75
percent of the average labor productivity of formal firms
that do not experience informal competition. This suggests
that competition from the informal sector can erode formal
firms' market share and the resources available to
boost productivity where formal firms shoulder the
additional cost of regulatory compliance. These findings are
robust to a range of firm and country characteristics as
well as checks for endogeneity concerns. |
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