The DOI matches its Crossref record; 18 of the 18 references it cites were found in a registry or an index.
Does it pay firms to register for taxes? The impact of formality on firm profitability
Abstract
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 the authors to control for a rich set of measures of owner ability and business motivations that can affect both profits and the decision to formalize. The paper identifies the impact of tax registration on business profitability using the distance of a firm from the tax office where registration occurs, conditional on the distance to the city center, as an instrument for registration. Proximity to the tax office provides firms with more information about registration, but is argued to not directly affect profits. The findings show that tax registration leads to significantly higher profits for the firms that the instrument affects. However, there is also evidence of heterogeneous effects of tax formality on profits. Tax registration is found to increase profits for the mid-size firms in the sample, but to lower profits for both the smaller and larger firms, in contrast to the standard view that formality increases profits. The analysis shows that owners of large firms who have managed to stay informal have higher entrepreneurial ability than formal firm owners, in contrast to the standard view (correct among smaller firms) that informal firm owners have low ability.
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Citations
Cites
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The economics of the informal sector: a simple model and some empirical evidence from Latin America
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Self-citation
Cited by
The Demand for, and Consequences of, Formalization among Informal Firms in Sri Lanka
de Mel, S., McKenzie, D., & Woodruff, C. (2013) · American Economic Journal: Applied Economics · doi:10.1257/app.5.2.122 · Cited by 320
Self-citationWilliams, C. C., & Shahid, M. S. (2016) · Entrepreneurship & Regional Development · doi:10.1080/08985626.2014.963889 · Cited by 301
Branstetter, L., Lima, F., Taylor, L. J., & Venâncio, A. (2014) · The Economic Journal · doi:10.1111/ecoj.12044 · Cited by 277
Grimm, M., & Paffhausen, A. L. (2015) · Labour Economics · doi:10.1016/j.labeco.2015.01.003 · Cited by 142
Piza, C., Cravo, T. A., Taylor, L., Gonzalez, L., Musse, I., Furtado, I., Sierra, A. C., & Abdelnour, S. (2016) · Campbell Systematic Reviews: Better Evidence for a Better World · doi:10.4073/csr.2016.1 · Cited by 58
Metadata
- Authors
- McKenzie, D., & Seynabou Sakho, Y.
- Venue
- Journal of Development Economics
- Publisher
- Elsevier BV
- Published
- 2010-01
- Volume
- 91
- Issue
- 1
- Pages
- 15-24
- ISSN
- 0304-3878 (ISSN-L)
- OpenAlex
- W1826442058
- Cited by
- 302
- References
- 18
- FWCI
- 26.63
- Type
- journal article
- Language
- en
- Open access
- closed
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Data sources
Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
