Enforcement of Regulation, Irregular Sector, and Firm Performance

Luigi Bonaventura () and Danilo Orlando

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we investigate how enforcement of regulation affects the size of irregular sector, firm perfomance and the exit rate to the market. Three kinds of enforcement policy will be tested in the model: control, punish and legitimacy. The first policy is based on the number of inspectors present in the economy; the second is defined by the magnitude of punish; the third is measured by the social legitimacy. Our results show the negligible influence of control to enforce irregularity; the strong effect of punish on irregular sector with a high exit rate; the good effect of legitimacy policy in promoting regularity with a low output performance.

Keywords: Irregular sector; enforcement policies; exit rate; firm perfomance. (search for similar items in EconPapers)
JEL-codes: C63 O17 K42 E61 (search for similar items in EconPapers)
Date: 2007-03
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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:14686

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