decrease in income is solely due to the price e¤ect. Column 3 of Table 14 examines the e¤ect on real income by past occupation group. As mentioned above, for real income, the analysis is restricted to a smaller sample since the CPI is only available for 20 of the 34 municipalities in my main sample<sup>20</sup> . Column 3 of Table 14 thus reports the e¤ect on real income in the small sample. Although the e¤ect on the real income of incumbent registered business owners is slightly smaller than the e¤ect on their nominal income, it is statistically signi...cant.

The model also predicts that the income of informal business owners goes down after the reform. The regressions in Table 14, however, show no statistically signi...cant e¤ect on the income of informal business owners. It may be that informal business owners are not a¤ected by the decline in prices in the same way as formal business owners because the goods they are producing are di¤erentiated from formal sector goods.

The results for the e¤ect on employment in Subsection 6.2 indicate that the previously unemployed or out of the labor force were more likely to work as wage earners after the reform. These switchers should thus also have seen a increase in their income. When aiming to measure this increase, I cannot use log income as the outcome variable as is done in Table 14. Individuals who were initially unemployed or out of the labor force have zero income and thus have to be dropped from a log regression. I choose two di¤erent ways of including the zero income observations, which are reported in Table 15. First, Columns 1 through 3 display regressions where the outcome variable is the quadratic root of income. The quadratic root mimics the logarithmic function well for positive numbers. (See Thomas et al, 2003, who choose the quadratic root of income instead of log to include zero and negative yields). Second, Columns 5 through 6 of Table 15 report Tobit regressions. For the Tobit regressions, log(0) observations are replaced with the smallest observed log income in the data. This value is then used as the lower bound for the Tobit. The quadratic root and the Tobit regressions show a signi...cant increase in the income of the previously not employed. Nominal income for this group increased by approximately 6 percent.

The regressions in Table 14 and 15 show either no e¤ect or a negative and signi...cant e¤ect on the average income of previous wage earners. The wage earners who opened registered businesses, however, should be earning more. There are several possible explanations for the zero or negative e¤ect. First, wage earners who opened a business may still be paying o¤ the ...xed cost of their new business during the period of observation. When analyzing the e¤ect on the income of past wage earners, the regressions include a maximum of four quarters after the reform was implemented. This is due to the fact that the labor market survey keeps

> 20 The second column of Table 12 contains the same nominal income regression as Column 1, but for the smaller sample. The comparison between Columns 1 and 2 illustrates that the e¤ect on nominal income across samples is very similar for all past occupation groups.

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