This paper employs regression discontinuity methods to identify the effect of formality on Brazilian micro-firm performance. The SIMPLES program introduced in November 1996 consolidated multiple taxes and social security contributions into a single payment and reduced taxes for eligible small...

Social protection systems in developing countries are typically composed of a bundle of benefits, the major ones being health insurance and pensions. Benefit bundling may increase informality and decrease welfare. Indeed, if some of the benefits are valued at substantially less than their cost,...

This paper proposes an equilibrium matching model for developing countries' labor markets where the interaction between public, formal private and informal private sectors are taken into account. Theoretical analysis shows that gains from reforms aiming at liberalizing formal labor markets can...

This paper investigates empirically the fiscal and welfare trade-offs involved in designing a pension system when workers can avoid participation by working informally. A dynamic behavioral model captures a household's labor supply, formal/informal sector choice and saving decisions under the...

In many economies, there is substantial economic activity in the informal sector, beyond the reach of government policy. Labor market policies, which by definition apply only to the formal sector, can have important spillover effects on the informal sector. The relative sizes of the informal and...

We analyze how intermittent large expenditures on family ceremonies may affect an entrepreneur's investment decision in an informal enterprise. Our hypothesis is that the barrier between family and enterprise is thin and permeable. We test this hypothesis using a survey from Sénégal that...

The majority of firms in most developing countries are informal. We conducted a field experiment in Sri Lanka which provided incentives for informal firms to formalize. Offering only information about the registration process and reimbursement for direct registration costs had no impact on...

Many governments have spent much of the past decade trying to extend a helping hand to informal businesses by making it easier and cheaper for them to formalize. Much less effort has been devoted to raising the costs of remaining informal, through increasing enforcement of existing regulations....

This paper estimates the impact of registering for taxes on firm profits in Bolivia, the country with the highest levels of informality in Latin America. A new survey of micro and small firms enables us to control for a rich set of measures of owner ability and business motivations that can...