Who Fears Competition from Informal Firms? Evidence from Latin America

This paper investigates who is most affected by informal competition and how regulation and enforcement affect the extent and nature of this competition. Using newly-collected enterprise data for 6,466 manufacturing formal firms across 14 countries...

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Main Authors:	González, Alvaro S., Lamanna, Francesca
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ACCOUNTABILITY ACCOUNTING ADVERSE EFFECTS BENCHMARK BUSINESS ACTIVITIES BUSINESS ENTRY BUSINESS ENVIRONMENT BUSINESS ENVIRONMENTS BUSINESS INDICATOR BUSINESS INDICATORS BUSINESS REGULATIONS BUSINESS RELATIONSHIPS BUSINESS TO BUSINESS BUSINESSES BUYER BUYERS CAPITAL INTENSITY CAPITAL REQUIREMENT CENTRAL AMERICA COMMERCIAL BUSINESS COMMERCIAL CREDIT COMMERCIAL OPERATIONS COMPANY COMPETITIVENESS COMPETITORS CORRELATION MATRIX COST DIFFERENTIALS COST OF ENTRY COUNTRY COMPARISONS COUNTRY FIXED EFFECTS CREDIT CONSTRAINT CREDIT LINES CUSTOMS DEPOSIT DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GEOGRAPHY ECONOMIC PERFORMANCE ECONOMIES OF SCALE ELECTRICITY EMAILS EMPLOYMENT ENTERPRISE SURVEY ENTERPRISE SURVEYS ENTREPRENEUR EQUIPMENT EXPORT MARKETS EXPORTS EXTERNAL FINANCE EXTERNAL FINANCING FINANCIAL INSTITUTION FINANCIAL MARKETS FINANCIAL SERVICES FIRM PERFORMANCE FIRM SIZE FIRMS FIXED COST FIXED COSTS GDP GOVERNANCE INDICATOR GOVERNANCE INDICATORS GOVERNMENT REGULATION INCOME LEVELS INCOME TAX INFORMAL ECONOMY INSTITUTIONAL FRAMEWORK INVESTMENT CLIMATE JOB CREATION LATIN AMERICAN LAWS LEGAL PROTECTION LESS DEVELOPED COUNTRIES LICENSE LICENSES LICENSING LIMITED ACCESS LINE OF CREDIT LINES OF CREDIT LOAN LOW-INCOME COUNTRIES MANUFACTURERS MANUFACTURING MANUFACTURING INDUSTRIES MARKET OPPORTUNITIES MENU MIDDLE INCOME COUNTRY NATIONAL INCOME OUTPUT OUTPUTS PER CAPITA INCOME POLICY FORMULATION POLITICAL STABILITY POWER OUTAGES PRICE COMPETITION PRIVATE ENTITIES PRIVATE SECTOR PRIVATE SECTOR DEVELOPMENT PRODUCTIVITY PRODUCTIVITY GROWTH QUALITY OF SERVICES RADIO RED TAPE REGULATORY BURDENS REGULATORY ENVIRONMENT REGULATORY REQUIREMENTS RESULT RESULTS SAVINGS SMALL FIRMS SOUTH AMERICA SOUTH AMERICAN STARTUP SUPPLIERS TAX TAX ADMINISTRATION TAX CODE TAX RATE TAX RATES TAX_RATE TAXATION TELEVISION THIRD WORLD TRANSPORT USERS VENDORS VERIFICATIONS WEB WORLD ECONOMY
Online Access:	http://documents.worldbank.org/curated/en/2007/08/8091496/fears-competition-informal-firms-evidence-latin-america http://hdl.handle.net/10986/7258

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recordtype	oai_dc
spelling	okr-10986-72582021-04-23T14:02:34Z Who Fears Competition from Informal Firms? Evidence from Latin America González, Alvaro S. Lamanna, Francesca ACCOUNTABILITY ACCOUNTING ADVERSE EFFECTS BENCHMARK BUSINESS ACTIVITIES BUSINESS ENTRY BUSINESS ENVIRONMENT BUSINESS ENVIRONMENTS BUSINESS INDICATOR BUSINESS INDICATORS BUSINESS REGULATIONS BUSINESS RELATIONSHIPS BUSINESS TO BUSINESS BUSINESSES BUYER BUYERS CAPITAL INTENSITY CAPITAL REQUIREMENT CENTRAL AMERICA COMMERCIAL BUSINESS COMMERCIAL CREDIT COMMERCIAL OPERATIONS COMPANY COMPETITIVENESS COMPETITORS CORRELATION MATRIX COST DIFFERENTIALS COST OF ENTRY COUNTRY COMPARISONS COUNTRY FIXED EFFECTS CREDIT CONSTRAINT CREDIT LINES CUSTOMS DEPOSIT DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GEOGRAPHY ECONOMIC PERFORMANCE ECONOMIES OF SCALE ELECTRICITY EMAILS EMPLOYMENT ENTERPRISE SURVEY ENTERPRISE SURVEYS ENTREPRENEUR EQUIPMENT EXPORT MARKETS EXPORTS EXTERNAL FINANCE EXTERNAL FINANCING FINANCIAL INSTITUTION FINANCIAL MARKETS FINANCIAL SERVICES FIRM PERFORMANCE FIRM SIZE FIRMS FIXED COST FIXED COSTS GDP GOVERNANCE INDICATOR GOVERNANCE INDICATORS GOVERNMENT REGULATION INCOME LEVELS INCOME TAX INFORMAL ECONOMY INSTITUTIONAL FRAMEWORK INVESTMENT CLIMATE JOB CREATION LATIN AMERICAN LAWS LEGAL PROTECTION LESS DEVELOPED COUNTRIES LICENSE LICENSES LICENSING LIMITED ACCESS LINE OF CREDIT LINES OF CREDIT LOAN LOW-INCOME COUNTRIES MANUFACTURERS MANUFACTURING MANUFACTURING INDUSTRIES MARKET OPPORTUNITIES MENU MIDDLE INCOME COUNTRY NATIONAL INCOME OUTPUT OUTPUTS PER CAPITA INCOME POLICY FORMULATION POLITICAL STABILITY POWER OUTAGES PRICE COMPETITION PRIVATE ENTITIES PRIVATE SECTOR PRIVATE SECTOR DEVELOPMENT PRODUCTIVITY PRODUCTIVITY GROWTH QUALITY OF SERVICES RADIO RED TAPE REGULATORY BURDENS REGULATORY ENVIRONMENT REGULATORY REQUIREMENTS RESULT RESULTS SAVINGS SMALL FIRMS SOUTH AMERICA SOUTH AMERICAN STARTUP SUPPLIERS TAX TAX ADMINISTRATION TAX CODE TAX RATE TAX RATES TAX_RATE TAXATION TELEVISION THIRD WORLD TRANSPORT USERS VENDORS VERIFICATIONS WEB WORLD ECONOMY This paper investigates who is most affected by informal competition and how regulation and enforcement affect the extent and nature of this competition. Using newly-collected enterprise data for 6,466 manufacturing formal firms across 14 countries in Latin America, the authors show that formal firms affected by head-to-head competition with informal firms largely resemble them. They are small credit constrained, underutilize their productive capacity, serve smaller customers, and are in markets with low entry costs. In countries where the government is effective and business regulations onerous, formal firms in industries characterized by low costs to entry feel the sting of informal competition more than in other business environments. Finally, the analysis finds that in an economy with relatively onerous tax regulations and a government that poorly enforces its tax code, the percentage of firms adversely affected by informal competition will be reduced from 38.8 to 37.7 percent when the government increases enforcement to cover all firms. 2012-06-06T15:55:47Z 2012-06-06T15:55:47Z 2007-08 http://documents.worldbank.org/curated/en/2007/08/8091496/fears-competition-informal-firms-evidence-latin-america http://hdl.handle.net/10986/7258 English Policy Research Working Paper; No. 4316 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Latin America & Caribbean
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ACCOUNTABILITY ACCOUNTING ADVERSE EFFECTS BENCHMARK BUSINESS ACTIVITIES BUSINESS ENTRY BUSINESS ENVIRONMENT BUSINESS ENVIRONMENTS BUSINESS INDICATOR BUSINESS INDICATORS BUSINESS REGULATIONS BUSINESS RELATIONSHIPS BUSINESS TO BUSINESS BUSINESSES BUYER BUYERS CAPITAL INTENSITY CAPITAL REQUIREMENT CENTRAL AMERICA COMMERCIAL BUSINESS COMMERCIAL CREDIT COMMERCIAL OPERATIONS COMPANY COMPETITIVENESS COMPETITORS CORRELATION MATRIX COST DIFFERENTIALS COST OF ENTRY COUNTRY COMPARISONS COUNTRY FIXED EFFECTS CREDIT CONSTRAINT CREDIT LINES CUSTOMS DEPOSIT DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GEOGRAPHY ECONOMIC PERFORMANCE ECONOMIES OF SCALE ELECTRICITY EMAILS EMPLOYMENT ENTERPRISE SURVEY ENTERPRISE SURVEYS ENTREPRENEUR EQUIPMENT EXPORT MARKETS EXPORTS EXTERNAL FINANCE EXTERNAL FINANCING FINANCIAL INSTITUTION FINANCIAL MARKETS FINANCIAL SERVICES FIRM PERFORMANCE FIRM SIZE FIRMS FIXED COST FIXED COSTS GDP GOVERNANCE INDICATOR GOVERNANCE INDICATORS GOVERNMENT REGULATION INCOME LEVELS INCOME TAX INFORMAL ECONOMY INSTITUTIONAL FRAMEWORK INVESTMENT CLIMATE JOB CREATION LATIN AMERICAN LAWS LEGAL PROTECTION LESS DEVELOPED COUNTRIES LICENSE LICENSES LICENSING LIMITED ACCESS LINE OF CREDIT LINES OF CREDIT LOAN LOW-INCOME COUNTRIES MANUFACTURERS MANUFACTURING MANUFACTURING INDUSTRIES MARKET OPPORTUNITIES MENU MIDDLE INCOME COUNTRY NATIONAL INCOME OUTPUT OUTPUTS PER CAPITA INCOME POLICY FORMULATION POLITICAL STABILITY POWER OUTAGES PRICE COMPETITION PRIVATE ENTITIES PRIVATE SECTOR PRIVATE SECTOR DEVELOPMENT PRODUCTIVITY PRODUCTIVITY GROWTH QUALITY OF SERVICES RADIO RED TAPE REGULATORY BURDENS REGULATORY ENVIRONMENT REGULATORY REQUIREMENTS RESULT RESULTS SAVINGS SMALL FIRMS SOUTH AMERICA SOUTH AMERICAN STARTUP SUPPLIERS TAX TAX ADMINISTRATION TAX CODE TAX RATE TAX RATES TAX_RATE TAXATION TELEVISION THIRD WORLD TRANSPORT USERS VENDORS VERIFICATIONS WEB WORLD ECONOMY
spellingShingle	ACCOUNTABILITY ACCOUNTING ADVERSE EFFECTS BENCHMARK BUSINESS ACTIVITIES BUSINESS ENTRY BUSINESS ENVIRONMENT BUSINESS ENVIRONMENTS BUSINESS INDICATOR BUSINESS INDICATORS BUSINESS REGULATIONS BUSINESS RELATIONSHIPS BUSINESS TO BUSINESS BUSINESSES BUYER BUYERS CAPITAL INTENSITY CAPITAL REQUIREMENT CENTRAL AMERICA COMMERCIAL BUSINESS COMMERCIAL CREDIT COMMERCIAL OPERATIONS COMPANY COMPETITIVENESS COMPETITORS CORRELATION MATRIX COST DIFFERENTIALS COST OF ENTRY COUNTRY COMPARISONS COUNTRY FIXED EFFECTS CREDIT CONSTRAINT CREDIT LINES CUSTOMS DEPOSIT DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GEOGRAPHY ECONOMIC PERFORMANCE ECONOMIES OF SCALE ELECTRICITY EMAILS EMPLOYMENT ENTERPRISE SURVEY ENTERPRISE SURVEYS ENTREPRENEUR EQUIPMENT EXPORT MARKETS EXPORTS EXTERNAL FINANCE EXTERNAL FINANCING FINANCIAL INSTITUTION FINANCIAL MARKETS FINANCIAL SERVICES FIRM PERFORMANCE FIRM SIZE FIRMS FIXED COST FIXED COSTS GDP GOVERNANCE INDICATOR GOVERNANCE INDICATORS GOVERNMENT REGULATION INCOME LEVELS INCOME TAX INFORMAL ECONOMY INSTITUTIONAL FRAMEWORK INVESTMENT CLIMATE JOB CREATION LATIN AMERICAN LAWS LEGAL PROTECTION LESS DEVELOPED COUNTRIES LICENSE LICENSES LICENSING LIMITED ACCESS LINE OF CREDIT LINES OF CREDIT LOAN LOW-INCOME COUNTRIES MANUFACTURERS MANUFACTURING MANUFACTURING INDUSTRIES MARKET OPPORTUNITIES MENU MIDDLE INCOME COUNTRY NATIONAL INCOME OUTPUT OUTPUTS PER CAPITA INCOME POLICY FORMULATION POLITICAL STABILITY POWER OUTAGES PRICE COMPETITION PRIVATE ENTITIES PRIVATE SECTOR PRIVATE SECTOR DEVELOPMENT PRODUCTIVITY PRODUCTIVITY GROWTH QUALITY OF SERVICES RADIO RED TAPE REGULATORY BURDENS REGULATORY ENVIRONMENT REGULATORY REQUIREMENTS RESULT RESULTS SAVINGS SMALL FIRMS SOUTH AMERICA SOUTH AMERICAN STARTUP SUPPLIERS TAX TAX ADMINISTRATION TAX CODE TAX RATE TAX RATES TAX_RATE TAXATION TELEVISION THIRD WORLD TRANSPORT USERS VENDORS VERIFICATIONS WEB WORLD ECONOMY González, Alvaro S. Lamanna, Francesca Who Fears Competition from Informal Firms? Evidence from Latin America
geographic_facet	Latin America & Caribbean
relation	Policy Research Working Paper; No. 4316
description	This paper investigates who is most affected by informal competition and how regulation and enforcement affect the extent and nature of this competition. Using newly-collected enterprise data for 6,466 manufacturing formal firms across 14 countries in Latin America, the authors show that formal firms affected by head-to-head competition with informal firms largely resemble them. They are small credit constrained, underutilize their productive capacity, serve smaller customers, and are in markets with low entry costs. In countries where the government is effective and business regulations onerous, formal firms in industries characterized by low costs to entry feel the sting of informal competition more than in other business environments. Finally, the analysis finds that in an economy with relatively onerous tax regulations and a government that poorly enforces its tax code, the percentage of firms adversely affected by informal competition will be reduced from 38.8 to 37.7 percent when the government increases enforcement to cover all firms.
format	Publications & Research :: Policy Research Working Paper
author	González, Alvaro S. Lamanna, Francesca
author_facet	González, Alvaro S. Lamanna, Francesca
author_sort	González, Alvaro S.
title	Who Fears Competition from Informal Firms? Evidence from Latin America
title_short	Who Fears Competition from Informal Firms? Evidence from Latin America
title_full	Who Fears Competition from Informal Firms? Evidence from Latin America
title_fullStr	Who Fears Competition from Informal Firms? Evidence from Latin America
title_full_unstemmed	Who Fears Competition from Informal Firms? Evidence from Latin America
title_sort	who fears competition from informal firms? evidence from latin america
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2007/08/8091496/fears-competition-informal-firms-evidence-latin-america http://hdl.handle.net/10986/7258
_version_	1764402210787033088

Who Fears Competition from Informal Firms? Evidence from Latin America

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