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Does It Pay Firms to Register for Taxes? The Impact of Formality on Firm Profitability

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dc.contributor.authorSeynabou Sakho, Yaye
dc.contributor.authorMcKenzie, David
dc.date.accessioned2012-03-30T07:29:36Z
dc.date.available2012-03-30T07:29:36Z
dc.date.issued2010
dc.description.abstractThis 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 us to control for a rich set of measures of owner ability and business motivations that can affect both profits and the decision to formalize. We identify 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. We find tax registration leads to significantly higher profits for the firms that the instrument affects. However, we also find some evidence of heterogeneous effects of tax formality on profits. Tax registration appears to increase profits for the mid-sized firms in our sample, but to lower profits for both the marginal smaller and larger firms, in contrast to the standard view that formality increases profits. We show that owners of large firms who have managed to stay informal are of higher entrepreneurial ability than formal firm owners, in contrast to the standard view (correct among smaller firms) that informal firm owners are low ability.en
dc.identifier.citationJournal of Development Economics
dc.identifier.issn03043878
dc.identifier.urihttps://hdl.handle.net/10986/4760
dc.language.isoEN
dc.rightsCC BY-NC-ND 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/3.0/igo
dc.subjectBusiness Taxes and Subsidies including sales and value-added (VAT) H250
dc.subjectFiscal Policies and Behavior of Economic Agents: Firm H320
dc.subjectFirm Performance: Size, Diversification, and Scope L250
dc.subjectFiscal and Monetary Policy in Development O230
dc.subjectMicrodata Set
dc.titleDoes It Pay Firms to Register for Taxes? The Impact of Formality on Firm Profitabilityen
dc.title.alternativeJournal of Development Economicsen
dc.typeJournal Articleen
dc.typeArticle de journalfr
dc.typeArtículo de revistaes
dspace.entity.typePublication
okr.doctypeJournal Article
okr.externalcontentExternal Content
okr.identifier.doi10.1016/j.jdeveco.2009.02.003
okr.identifier.externaldocumentum1234
okr.journal.nbpages15-24
okr.language.supporteden
okr.peerreviewAcademic Peer Review
okr.region.countryBolivia
okr.region.geographicalLatin America
okr.relation.associateddatasethttp://microdata.worldbank.org/index.php/catalog/1314
okr.relation.associatedurlhttp://dx.doi.org/10.1016/j.jdeveco.2009.02.003
okr.relation.associatedurlhttp://search.ebscohost.com/login.aspx?direct=true&db=eoh&AN=1077219&site=ehost-live
okr.relation.associatedurlhttp://www.elsevier.com/wps/find/journaldescription.cws_home/505546/description#description
okr.relation.associatedurlhttps://openknowledge.worldbank.org/handle/10986/7536
okr.volume91
relation.isAuthorOfPublication148d6d6d-76e5-5d6f-9af9-98313e30551f
relation.isAuthorOfPublication.latestForDiscovery148d6d6d-76e5-5d6f-9af9-98313e30551f
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