Does Formality Improve Micro-firm Performance? Evidence from the Brazilian SIMPLES Program Fajnzylber, Pablo Maloney, William F. Montes-Rojas, Gabriel V. 2012-03-30T07:34:09Z 2012-03-30T07:34:09Z 2011
dc.description.abstract 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. en
dc.identifier.citation Journal of Development Economics
dc.identifier.issn 03043878
dc.language.iso EN
dc.rights.holder World Bank
dc.subject Production
dc.subject Cost
dc.subject Capital, Total Factor, and Multifactor Productivity
dc.subject Capacity D240
dc.subject Business Taxes and Subsidies including sales and value-added (VAT) H250
dc.subject Labor Demand J230
dc.subject Formal and Informal Sectors
dc.subject Shadow Economy
dc.subject Institutional Arrangements O170
dc.title Does Formality Improve Micro-firm Performance? Evidence from the Brazilian SIMPLES Program en
dc.title.alternative Journal of Development Economics en
dc.type Journal Article en
dc.type Article de journal fr
dc.type Artículo de revista es
dspace.entity.type Publication
okr.doctype Journal Article
okr.externalcontent External Content
okr.identifier.externaldocumentum 677
okr.journal.nbpages 262-276
okr.language.supported en
okr.peerreview Academic Peer Review Brazil
okr.volume 94
relation.isAuthorOfPublication c7d4d195-f430-5039-b564-a3e95b24a117