The analysis presented in this paper defines three different synthetic measurements ofdisincentives for formal work: two standard measurements, namely the tax wedge and themarginal effective tax rate (METR); and a new, innovative measurement called formalizationtax rate (FTR). The novelty of the...

We study the impact of tax and minimum wage reforms on the incidence of informality. Togauge the incidence of informality, we use measures of the extent of tax evasion, the extentof minimum wage non-compliance, and the size of the informal workforce. Our approachallows us to examine (i) the...

An industry is modeled in which entrepreneurs, who are heterogeneous in ability, may produce formally or informally. It is shown how the formal-informal mix depends on the distribution of ability, product demand and various parameter values...

Is the vast army of the self-employed in low income countries a source of employment generation? We use data from surveys in Sri Lanka to compare the characteristics of own account workers (non-employers) with wage workers and with owners of larger firms[...]

By using official time series of the Italian evaded VAT base (Ministry of Finance) for the period 1980-2004 we investigate empirically the long-run characteristics of tax evasion and the relationship with the tax burden. We focus on three important issues not analyzed so far[...]

This paper estimates the impact of registering for taxes on firm profits in Bolivia, the countrywith the highest levels of informality in Latin America. A new survey of micro and small firmsenables us to control for a rich set of measures of owner ability and business motivations thatcan affect...

We estimate the wage penalty associated with working in the South African informal sector.To this end we use a rich data set on non-self employed males that allows one to accuratelydistinguish workers employed in the informal sector from those employed in the formal sectorand link individuals...

We model decisions with respect to formality or informality for entrepreneurs in a newindustry for a developing economy. We show that informality allows a leader to explore,without significant sunk costs, the potential profitability of the industry; that is, informality maybe a stepping stone,...

Small and informal firms account for a large share of employment in developing countries.The rapid expansion of microfinance services is based on the belief that these firms haveproductive investment opportunities and can enjoy high returns to capital if given theopportunity...