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Heterogeneous firms and the impact of government policy on welfare and informality

Caterina Mendicino () and Jose Prado ()

Economics Letters, 2014, vol. 124, issue 1, 151-156

Abstract: We analyze the formality benefits through productivity-enhancing public goods. We document that: benefits from formality matter for firms’ optimal decisions; there is a disconnect between the objectives of maximizing formality versus welfare; this disconnect is mitigated under higher formality benefits.

Keywords: Firm heterogeneity; Production complementarity; Taxation; Enforcement; Regulation (search for similar items in EconPapers)
JEL-codes: E26 E62 H32 O17 (search for similar items in EconPapers)
Date: 2014
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Handle: RePEc:eee:ecolet:v:124:y:2014:i:1:p:151-156