Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/236580 
Year of Publication: 
2018
Citation: 
[Journal:] Open Economics [ISSN:] 2451-3458 [Volume:] 1 [Issue:] 1 [Publisher:] De Gruyter [Place:] Warsaw [Year:] 2018 [Pages:] 49-70
Publisher: 
De Gruyter, Warsaw
Abstract: 
Many entrepreneurs work informally because it is costly to start and run a business legally. Using a dynamic model of industry equilibrium, I show that the costs of the legal system can explain the cross country variability of the size of the informal economy. The model implies that the business start-up costs are more important than taxes and labor market regulations. Small, less productive, entrepreneurs, facing high entry costs, start informally, waiting to become more productive before legalizing. Informality is often the doorstep of the legal system.
Subjects: 
Entry
Informality
Regulation
Start-up
JEL: 
O17
L51
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article
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