who suffers the penalty a panel data analysis of earnings gaps in vietnam in spite of its predominant economic weight in developing countries little is known about the informal sector earnings structure compared to that of the formal sector taking advantage of the rich vhlss dataset in vietnam in particular its three wave panel data 2002 2004 2006 we assess the magnitude of various formal informal earnings gaps while addressing heterogeneity at three different levels the worker the job wage employment vs self employment and the earnings distribution we estimate fixed effects and quantile regressions to control for unobserved individual characteristics our results suggest that the informal sector earnings gap highly depends on the workers job status and on their relative position in the earnings distribution penalties may in some cases turn into premiums by comparing our results with studies in other developing countries we draw conclusions highlighting vietnam s labour market specificity

benefits of a registration policy for microenterprise performance in india this paper evaluates the effects of a voluntary registration policy with government authorities on financial performance of urban microenterprises in the indian manufacturing sector using data from the 2006 world bank survey of indian microenterprises and applying the semi parametric propensity score matching technique we find that being registered leads to significant gains in sales per employee and value added per employee large gains are also noted for male owned firms those operating with or without paid labor and those operating outside of the owner s home

state business relations and economic growth in sub saharan africa abstract this paper contributes to the literature on the determinants of economic growth in sub saharan africa by examining the effect of effective state business relations on economic growth for a panel of 19 sub saharan african countries for the period 1970 2004 we propose a measure that we argue captures the various dimensions of effective state business relations in sub saharan africa we then estimate standard growth regressions using dynamic panel data methods with this measure along with the more conventionally used measures of institutional quality such as degree of executive constraints the rule of law the degree of corruption and the quality of the bureaucracy our results show that effective state business relations contribute significantly to economic growth countries which have shown improvements in state business relations have witnessed higher economic growth controlling for other determinants of economic growth and independent of other measures of institutional quality

crime and microenterprise growth evidence from mexico summary we explore the relationship between property crime and growth among microenterprises in mexico we use data on microenterprises and crime incidence from victimization surveys we find that higher rates of property crime are associated with a significantly lower probability an enterprise plans to expand or experiences income growth in the subsequent 12 months these effects are unique to property crimes and are not due to preventative measures undertaken by more rapidly expanding firms or other sources of reverse causality these conclusions also are robust to a number of controls for firm heterogeneity and for local institutional quality

releasing constraints to growth or pushing on a string policies and performance of mexican micro firms abstract using firm level data from mexico this paper investigates the firm characteristics associated with participation in credit markets access to training tax payments and membership in business associations we find that firms which participate in these institutions exhibit significantly higher profits moreover firms that borrow from formal or informal sources and those that pay taxes are significantly more likely to stay in business but firms that received credit exhibit lower rates of income growth these results persist when firm characteristics that are arguably correlated with unobserved entrepreneurial ability are controlled for our findings suggest that the significant within country differences in firm productivity observed in developing economies are due in part to market and government failures that limit the ability of micro firms to reach their optimal sizes

moral hazard and nonmarket institutions dysfunctional crowding out or peer monitoring the authors examine a situation in which insurance is characterized by moral hazard when market insurance is provided supplementary mutual assistance between family and friends unobservable to market insurers will occur when nonmarket insurers have no better information than market insurers the mutual assistance not only crowds out market insurance but is also harmful and therefore dysfunctional alternatively when nonmarket insurers can observe each other s effort perfectly mutual assistance is beneficial these results point to the potential importance of peer monitoring mechanisms in mitigating moral hazard copyright 1991 by american economic association

employers on line recruitment and screening practices i introduction at a relatively low cost the internet offers employers and job searchers access to detailed and up to date information about job searchers and job vacancies in different locations around the world as well as novel tools that improve the ease and speed of search 1 it is therefore not surprising that using the internet has become an integral part of employers and job searchers search practices 2 however research has to date revealed relatively little about the internet s role in matching job searchers to jobs about activities that employers and job searchers pursue on line and whether the internet benefits all employers and job searchers equally in this paper we use technology in a novel way in order to collect new data and assess how employers use services offered by on line job boards in an attempt to facilitate their search the data record descriptions of job vacancies that were posted on the on line job board monster com from 2004 to 2006 from each vacancy s description we can identify employers use of on line search tools offered free of charge by monster com that are designed to facilitate employers search we can also identify several vacancy and employer attributes after the data collection we tracked each vacancy for 16 weeks to identify the week a vacancy could no longer be accessed for viewing on the basis of this information we construct a measure of an employer s on line search outcome the duration of a vacancy s posting on monster com we use these insights for two purposes first we examine employers use of services that are offered by monster com the incidence of employers use of these services when posting job openings on line and attributes that can help to explain their use second we examine whether vacancy and employer characteristics can also help to explain how long it takes before employers withdraw postings of their job vacancies from the on line job board we find that not all employers choose to use on line search tools when posting their vacancies on monster com even though the tools can be used free of charge and are designed to facilitate employers search on line recruitment and screening tools are more likely to be used when employers indicate active engagement in search or have a better knowledge of the monster s online search technology due to having used it frequently a standard model of employer search suggests that vacancy characteristics should help to explain employers choice of on line search tools however we find that relatively small differences exist in the likelihood that the online search tools are used across different types of vacancies both vacancy and employer characteristics can help to explain differences in the duration of a vacancy s posting on monster com in a manner that is consistent with a model of employer search in his survey autor 2001 was the first to review potential implications of the internet for the functioning of the labor market at the time when the on line recruiting industry was in its infancy since then several papers have drawn on different data to examine the internet s role in the labor market our paper complements this literature in three respects first it is one of the first to document how employers use services offered by on line job boards to facilitate their recruitment efforts in this respect the paper by hadass 2004 is of some interest using data on the recruitment efforts of a single u s manufacturing firm in the second half of the 1990s hadass finds that new hires who were recruited via the internet experience shorter tenure than those recruited via informal channels but similar tenure to those recruited through newspaper ads or a hired recruitment agency in her analysis hadass can say much more about the internet s role in matching workers to jobs than this paper because the author observes the outcomes of job searchers who were recruited on line and can compare them to the outcomes of job searchers who were recruited through traditional search channels

who is credit constrained in the u s economy an important assumption of the life cycle model of consumption is the postulate of perfect capital markets this hypothesis has recently been challenged by substantial empirical evidence hall and mishkin 1982 using the panel study of income dynamics estimate that 20 percent of united states families are liquidity constrained mariger 1986 derives a life cycle model with endogenous liquidity constraints and using a cross section estimates this fraction to be 19 4 percent hubbard and judd 1986 simulate a model with a constraint on net worth which shows that with reasonable assumptions about preferences 19 0 percent of united states consumers are liquidity constrained the emerging consensus points therefore to a fraction of approximately 20 percent of the population behaving in a manner that is inconsistent with the pure life cycle model in addition hayashi 1985 and zeldes 1989 investigate the correlation among consumption wealth and income for various population groups and infer that liquidity constraints are more important for younger families with low levels of wealth and saving the main limitation of these studies is that in their data sets constrained consumers are not observable and have to be identified via indirect evidence thus there is as yet little firm evidence about the characteristics of the consumers who are likely to be credit constrained this paper adopts an approach that differs from previous tests for liquidity constraints because it makes use of data where constrained consumers are observable and explicitly links their existence to credit market imperfections and personal characteristics the data drawn from the 1983 survey of consumer finances scf and described in section ii provide information on individuals whose request for credit has been rejected by financial intermediaries in section iii a model is developed in which consumers and lenders behavior jointly determines the probability that a consumer is rationed in the credit market this probability is then

officials versus thieves is public or private expropriation more harmful to small firms abstractcorruption and crime are factors that regularly affect firms yet few papers compare the two impacts this is largely due to a lack of data something i overcome using recent surveys of microenterprises in mexico after instrumenting for individual firm level incidence i find that thieves are much more harmful to microenterprises than officials the incidence of robbery and extortion is associated with declines in income and employees while the incidence of bribery and fines are associated with increases in both this highlights that crime can be a larger deterrent to firm growth than corruption in certain environments

the benefits of formalization evidence from vietnamese manufacturing smes summary based on unique panel data consisting of both formal and informal firms this paper uses a matched double difference approach to examine the relationship between legal status and firm level outcomes in micro small and medium manufacturing enterprises smes in vietnam controlling for determining factors and observable time variant factors that may simultaneously influence the decision to formalize and subsequent firm performance we find evidence that becoming officially registered leads to an increase in profits and investments and a decrease in the use of casual labor improved contract conditions for workers thus we conclude that formalizing is beneficial both to firms and the workers in these firms

discrimination in the small business credit market we use data from the 1993 and 1998 national surveys of small business finances to examine the existence of racial discrimination in the small business credit market we conduct an econometric analysis of loan outcomes by race and find that black owned small businesses are about twice as likely to be denied credit even after controlling for differences in creditworthiness and other factors a series of specification checks indicates that this gap is unlikely to be explained by omitted variable bias these results indicate that the racial disparity in credit availability is likely caused by discrimination

shadow economies size causes and consequences using various methods the size of the shadow economy in 76 developing transition and oecd countries is estimated average size varies from 12 percent of gdp for oecd countries to 23 percent for transition countries and 39 percent for developing countries increasing taxation and social security contributions combined with rising state regulations are driving forces for the increase of the shadow economy especially in oecd countries according to some findings corruption has a positive impact on the size of the shadow economy and a growing shadow economy has a negative effect on official gdp growth

latin america s social policy challenge education social insurance redistribution abstract long regarded as a region beset by macroeconomic instability high inflation and excessive poverty and inequality latin america has undergone a major transformation over the last 20 years the region has seen improved macroeconomic management and substantial and sustained reductions in poverty and inequality in this paper we argue that social policy including human capital and education social insurance and redistribution need special attention if achievements of the last two decades are to be sustained and amplified starting in the mid 1990s many governments in the region introduced a variety of programs including noncontributory pensions and health insurance and cash transfers targeted to the poor social spending in latin america increased sharply these policies have been widely praised and we believe they have resulted in substantial improvements in the lives of the poor in the region however a more nuanced view shows some worrisome trends moving forward we believe it is nec

on the short and medium term effects of formalisation panel evidence from vietnam abstractthis paper analyses the consequences of formalisation on the performance of informal firms using a panel dataset from vietnam we find that switching firms before switching have higher profit and value added compared to non switching firms suggesting heterogeneity becoming formal leads to an additional increase in switching firms profit and value added the benefits of formalisation materialise in the short term one year and persist in the longer term three or more years these benefits run through various channels such as better access to powered equipment or higher business association membership but not better access to credit

returns to capital in microenterprises evidence from a field experiment small and informal firms account for a large share of employment in developing countries the rapid expansion of microfinance services is based on the belief that these firms have productive investment opportunities and can enjoy high returns to capital if given the opportunity however measuring the return to capital is complicated by unobserved factors such as entrepreneurial ability and demand shocks which are likely to be correlated with capital stock the authors use a randomized experiment to overcome this problem and to measure the return to capital for the average microenterprise in their sample regardless of whether they apply for credit they accomplish this by providing cash and equipment grants to small firms in sri lanka and measuring the increase in profits arising from this exogenous positive shock to capital stock after controlling for possible spillover effects the authors find the average real return to capital to be 5 7 percent a month substantially higher than the market interest rate they then examine the heterogeneity of treatment effects to explore whether missing credit markets or missing insurance markets are the most likely cause of the high returns returns are found to vary with entrepreneurial ability and with measures of other sources of cash within the household but not to vary with risk aversion or uncertainty

government effectiveness and regional variation in informal employment abstract this article analyses the role of government effectiveness in the determination of informal employment a theoretical model is developed in which local governance and worker skill level are assumed to influence the decision of the worker whether to seek employment in the formal or informal sectors the model is assessed empirically using data from brazil where almost half of the urban labour force is employed informally the empirical analysis supports the predictions of the model and suggests that the probability of a worker being employed informally is lower in regions with better governance and higher average education

earnings and caste an evaluation of caste wage differentials in the nepalese labour market abstractthis paper examines the sources of wage differentials among castes in nepal a country which had until 1963 an age old caste based social division of labour we use an extended oaxaca decomposition model with occupation and firm size augmenting the conventionally used measures of human capital endowments our results indicate that caste wage differentials in nepal are large and that human capital endowments and lack of access to better paying occupations and larger firms have a significant impact furthermore we find mixed evidence that the government policy of affirmative action has narrowed down the caste wage differential

the effects of human capital interventions on entrepreneurial performance in industrialized countries this paper provides a systematic review of studies on the effects of human capital interventions on entrepreneurial performance in industrialized countries we identify 21 experimental and quasi experimental studies published before september 2018 these studies examine the effects of business training formal education and entrepreneurship education their performance outcomes include firm profits firm size and entrepreneurial earnings the main finding across these studies is that these interventions do not have statistically significant effects formal education is the only exception showing positive effects on firm profits and entrepreneurial earnings yet these effects are small in magnitude evidence is inconclusive regarding effect duration these findings stand in stark contrast to correlational studies which tend to find large positive correlations between human capital interventions and entrepreneurial performance we therefore conclude that correlational studies tend to overestimate the benefits of human capital interventions moreover our estimates show that the interventions are associated with moderately low additionality

stock dividends stock splits and signaling this paper provides evidence that firms signal their private information about future earnings by their choice of split factor split factors are increasing in earnings forecast errors after controlling for differences in pre split price and firm size furthermore price changes at stock dividend and split announcements are significantly correlated with split factors holding other factors constant and with earnings forecast errors these correlations suggest that management s choice of split factor signals private information about future earnings and that investors revise their beliefs about firm value accordingly the analysis also suggests however that announcement returns are significantly correlated with split factors after controlling for earnings forecast errors this suggests that earnings forecast errors measure management s private information about future earnings with error that split factors signal other valuation relevant attributes or that a signaling explanation is incomplete researchers have long puzzled over the role of stock splits and stock dividends a stock dividend or split increases the number of equity shares outstanding but has no effect on shareholders proportional ownership of shares it is therefore puzzling that firms engage in these transactions and even more so that stock prices rise on average when these transactions are announced as grinblatt masulis and titman 1984 document the significant positive announcement effects led grinblatt masulis and titman hereafter gmt to hypothesize that firms signal information about their future earnings or equity values through their split decisions to date this hypothesis has met with limited support gmt conclude that the announcement returns cannot be explained by forecasts of imminent increases in cash dividends because they observe similar stock price behavior in firms that do not pay dividends our study provides further evidence on the signaling hypothesis by testing whether stock dividends and splits convey information about future earnings and by testing whether the split factor itself is the signal the notion that the split factor may act as a signal has institutional as well as theoretical support practitioners have long contended that the purpose of stock splits is to move a firm s share price into an optimal trading range baker and gallagher 1980 who surveyed chief financial officers of firms that split their shares report that 94 of their sample indicated their stock splits moved their

taxing the informal economy the current state of knowledge and agendas for future research abstractthis paper reviews the literature on taxation of the informal economy taking stock of key debates and drawing attention to recent innovations conventionally the debate on whether to tax has frequently focused on the limited revenue potential high cost of collection and potentially adverse impact on small firms recent arguments have increasingly emphasised the more indirect benefits of informal taxation in relation to economic growth broader tax compliance and governance more research is needed we argue into the relevant costs and benefits for all including quasi voluntary compliance political and administrative incentives for reform and citizen state bargaining over taxation

does formality improve micro firm performance evidence from the brazilian simples program 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

surprise vs anticipated information announcements are prices affected differently an investigation in the context of stock splits we compare the long run reaction to anticipated and surprise information announcements using stock splits although there is underreaction in both cases anticipated splits are treated differently to those that are unforeseen after anticipated splits cumulative abnormal returns peak at one and a half times the level observed after unanticipated splits although the time taken for the announcement to be absorbed into prices is the same we explain the difference in underreaction by the degree to which split announcements are believed and hence invested in the favorable signal conveyed in forecast splits is more credible owing to their better pre split performance resulting in a far more pronounced underreaction effect

informality and profitability evidence from a new firm survey in ecuador this paper estimates the impact of informality on firm profits using a new firm level survey designed specifically for this study the survey was administered to about 1 200 firms with 50 employees or less in ecuador s two largest cities quito and guayaquil plus two main centers of economic activity near the northern and southern borders the paper s results confirm that the extent of firms compliance with a set of regulatory requirements is linked to the perceived costs and benefits of informality such as the probability of detection by the authorities and the likelihood of being fined nonetheless taking into account the non random placement of firms along the formality informality spectrum and controlling for a large set of firm owner and location characteristics the paper finds that more formal firms tend to be more profitable and have higher output per worker this impact operates inter alia through more formal firms ability to obtain improved access to credit and achieve higher sales by issuing receipts to clients