ECON 315 Lecture Notes - Lecture 12: Informal Sector, Washington Consensus, North American Free Trade Agreement
23 Jun 2017
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(2) informal firms are small, unproductive, and stagnant. (3) regulation doesn"t keep informal firms down. De soto (1989) argued that informal firms would like to become formal, but are held back by corruption and government regulation. We see that other things -- limited access to financing is actually keeping them out. Informal firms inhabit an economic space of their own, disconnected from the formal space. An average surveyed informal firm has been in business for nearly a decade without attempting to become formal. Only 2 percent of informal firms sell their output to large firms. Compared to 14% of small formal sector firms. (5) as countries develop, informality becomes less important. Policy reforms have focused on reducing the cost of registration. In brazil firms were randomly assigned to a control group or one of three treatment groups ******************** (1) received information about how to formalize.
