Informality and Profitability : Evidence from a New Firm Survey in Ecuador
This paper estimates the impact of informality on firm profits using a new firm-level survey designed specifically for this study. The survey was administered to about 1,200 firms with 50 employees or less in Ecuador's two largest cities, Quit...
| Main Authors: | , |
|---|---|
| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2013
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2013/05/17654994/informality-profitability-evidence-new-firm-survey-ecuador http://hdl.handle.net/10986/15573 |
| Summary: | This paper estimates the impact of
informality on firm profits using a new firm-level survey
designed specifically for this study. The survey was
administered to about 1,200 firms with 50 employees or less
in Ecuador's two largest cities, Quito and Guayaquil,
plus two main centers of economic activity near the northern
and southern borders. The paper's results confirm that
the extent of firms' compliance with a set of
regulatory requirements is linked to the perceived costs and
benefits of informality, such as the probability of
detection by the authorities and the likelihood of being
fined. Nonetheless, taking into account the non-random
placement of firms along the formality-informality spectrum
and controlling for a large set of firm, owner, and location
characteristics, the paper finds that more formal firms tend
to be more profitable and have higher output per worker.
This impact operates, inter alia, through more formal
firms' ability to obtain improved access to credit and
achieve higher sales by issuing receipts to clients. |
|---|