Does Formality Improve Micro-firm Performance? Evidence from the Brazilian SIMPLES Program

This paper exploits an extensive Brazilian micro-enterprise survey and the 1996 introduction of a business tax reduction and simplification scheme (SIMPLES) to examine three questions. First, do high tax rates and complex tax regulations really constitute a barrier to the formalization of micro-firm...

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Main Authors:	Fajnzylber, Pablo, Maloney, William F., Montes-Rojas, Gabriel V.
Format:	Journal Article
Language:	EN
Published:	2012
Subjects:	Production Cost Capital, Total Factor, and Multifactor Productivity Capacity D240 Business Taxes and Subsidies including sales and value-added (VAT) H250 Labor Demand J230 Formal and Informal Sectors Shadow Economy Institutional Arrangements O170
Online Access:	http://hdl.handle.net/10986/5711

id	okr-10986-5711
recordtype	oai_dc
spelling	okr-10986-57112021-04-23T14:02:23Z Does Formality Improve Micro-firm Performance? Evidence from the Brazilian SIMPLES Program Fajnzylber, Pablo Maloney, William F. Montes-Rojas, Gabriel V. Production Cost Capital, Total Factor, and Multifactor Productivity Capacity D240 Business Taxes and Subsidies including sales and value-added (VAT) H250 Labor Demand J230 Formal and Informal Sectors Shadow Economy Institutional Arrangements O170 This paper exploits an extensive Brazilian micro-enterprise survey and the 1996 introduction of a business tax reduction and simplification scheme (SIMPLES) to examine three questions. First, do high tax rates and complex tax regulations really constitute a barrier to the formalization of micro-firms? Second, does formalization improve firm performance measured along several dimensions, including revenues, employment and capital stock? Third, what are the channels through which this occurs? We find that SIMPLES led to a significant increase in formality in several dimensions. Moreover, newly created firms that opt for operating formally show higher levels of revenue and profits, employ more workers and are more capital intensive (only for those firms that have employees). The channel through which this occurs is not access to credit or contracts with larger firms. Rather, it appears that the lower cost of contracting labor leads to adopting production techniques that involve a permanent location and a larger paid labor force. 2012-03-30T07:34:09Z 2012-03-30T07:34:09Z 2011 Journal Article Journal of Development Economics 03043878 http://hdl.handle.net/10986/5711 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article Brazil
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	EN
topic	Production Cost Capital, Total Factor, and Multifactor Productivity Capacity D240 Business Taxes and Subsidies including sales and value-added (VAT) H250 Labor Demand J230 Formal and Informal Sectors Shadow Economy Institutional Arrangements O170
spellingShingle	Production Cost Capital, Total Factor, and Multifactor Productivity Capacity D240 Business Taxes and Subsidies including sales and value-added (VAT) H250 Labor Demand J230 Formal and Informal Sectors Shadow Economy Institutional Arrangements O170 Fajnzylber, Pablo Maloney, William F. Montes-Rojas, Gabriel V. Does Formality Improve Micro-firm Performance? Evidence from the Brazilian SIMPLES Program
geographic_facet	Brazil
relation	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description	This paper exploits an extensive Brazilian micro-enterprise survey and the 1996 introduction of a business tax reduction and simplification scheme (SIMPLES) to examine three questions. First, do high tax rates and complex tax regulations really constitute a barrier to the formalization of micro-firms? Second, does formalization improve firm performance measured along several dimensions, including revenues, employment and capital stock? Third, what are the channels through which this occurs? We find that SIMPLES led to a significant increase in formality in several dimensions. Moreover, newly created firms that opt for operating formally show higher levels of revenue and profits, employ more workers and are more capital intensive (only for those firms that have employees). The channel through which this occurs is not access to credit or contracts with larger firms. Rather, it appears that the lower cost of contracting labor leads to adopting production techniques that involve a permanent location and a larger paid labor force.
format	Journal Article
author	Fajnzylber, Pablo Maloney, William F. Montes-Rojas, Gabriel V.
author_facet	Fajnzylber, Pablo Maloney, William F. Montes-Rojas, Gabriel V.
author_sort	Fajnzylber, Pablo
title	Does Formality Improve Micro-firm Performance? Evidence from the Brazilian SIMPLES Program
title_short	Does Formality Improve Micro-firm Performance? Evidence from the Brazilian SIMPLES Program
title_full	Does Formality Improve Micro-firm Performance? Evidence from the Brazilian SIMPLES Program
title_fullStr	Does Formality Improve Micro-firm Performance? Evidence from the Brazilian SIMPLES Program
title_full_unstemmed	Does Formality Improve Micro-firm Performance? Evidence from the Brazilian SIMPLES Program
title_sort	does formality improve micro-firm performance? evidence from the brazilian simples program
publishDate	2012
url	http://hdl.handle.net/10986/5711
_version_	1764396043599872000

Does Formality Improve Micro-firm Performance? Evidence from the Brazilian SIMPLES Program

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