Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/45692 
Year of Publication: 
2009
Series/Report no.: 
Development Research Working Paper Series No. 08/2009
Publisher: 
Institute for Advanced Development Studies (INESAD), La Paz
Abstract: 
In this case study performed on the industrial sub-sector of manufacture of leather shoes in Bolivia, we use the Hsieh and Klenow model (2008) to determine the differences between productivity of larger and formal companies and productivity of smaller and informal companies. Our results reveal that there are not many differences in terms of productivity among these types of companies. We think that informality is indeed the most important factor that contributes to this phenomenon. Apparently, the decrease in costs associated with informality compensates to some extent the economies of scale of formal companies with bigger dimensions and better technology. A notable fact in the shoe manufacturing industry is that it had experienced an atomization process in the last years. This trend is the consequence of a progressive creation of many small informal companies instead of the consolidation of this industry in medium and large formal companies. In a way, informality has contributed to this process. First, because it allows the survival of less productive companies that if they were not informal, they would have to bear costs that would not allow them to continue in business. Second, because informality creates strong incentives for employees to start their own business. On the other hand, many costs associated with formality discourage legally operating companies to employ more people, raise capital and growth.
Document Type: 
Working Paper

Files in This Item:
File
Size
309.86 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.