This paper reports a negative relationship between the size of the shadow economy and generalized trust, in a sample of countries, both developed and developing. That relationship is robust to controlling for a large set of economic, policy, and institutional variables, to changing the estimate...

This paper analyses the determinants of the size of the informal economy using crosscountry regressions. Two sets of global data using indirect estimation techniques and the perception of business leaders for 109 countries as well as a regional set for Latin America based on direct data are used...

Theoretical models of the informal sector mostly assume—or end up with—a positive correlation between a measure of taxes and the size of the informal sector. However, some recent empirical studies associate higher taxes with a smaller informal sector size. In this paper, we build a...

This paper studies the relationship between the size of the shadow economy and generalized trust, on a cross-section of countries, both developed and developing, and finds that it is significantly negative. That relationship is robust to controlling for a large set of economic, policy, and...

In this paper, we present a model of tax evasion in the presence of imperfect auditing. We show that there is a clear link between the degree of observability associated with a given taxpayer or activity and that taxpayer’s optimal declaration strategy with respect to fiscal agency. We also...

This paper reports a negative relationship between the size of the shadow economy and generalized trust, in a sample of countries, both developed and developing. That relationship is robust to controlling for a large set of economic, policy, and institutional variables, to changing the estimate...

The paper studies the role of social capital in the urban informal sector in Bolivia. It shows that a formal firm has about 6.4 times the sales of an informal firm with no social capital, but informal firms use their social capital to compensate for the lack of formal productivity benefits. By...

This paper deals with informal firms’ behavior regarding tax registration and compliance. Data from the Investment Climate Assessment (ICA) survey in Senegal, conducted by the World Bank in 2004, were used within a microeconometric framework. Results reveal that taxes owed by unregistered...

In a dynamic general equilibrium model with credit constraints and heterogeneous firms I show that both tax policies and domestic financial market development (FD) can lead to lower informality. Tax policies are more effective in reducing informality since they directly increase the cost of...

This paper investigates the urbanization of the Indian manufacturing sector by combining enterprise data from formal and informal sectors. We find that plants in the formal sector are moving away from urban and into rural locations, while the informal sector is moving from rural to urban...