The determinants of the size distribution of firms in Uganda

Jonathan Goyette

The European Journal of Development Research, 2014, vol. 26, issue 4, 456-472

Abstract: The size distribution of firms in Uganda is highly skewed to the right both in 1997 and 2005. In this article I examine a potential explanation behind the shape of the size distribution in Uganda and identify, using data from 1997, a distortion from the tax environment that seems to bring together observed patterns in firm size. Two changes in tax audit strategy generate an increase in expected costs from taxation and entice entrepreneurs to restrain their hiring of labour in order to pass under tax officials’ radar. First, we observe a steep rise in audit probability at 10 employees, which generates a cluster of firms at 8 employees. Second, tax officials start relying on sales instead of size to set audit targets for firms with more than 25 employees. This change also implies that tax officials extract more taxes and bribes from the larger firms they inspect. The effect of this second change is so important that it generates a measurable discontinuity in the density of firm size around 27 employees. I show that most of the 1997 patterns are still observable almost a decade later.

Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.palgrave-journals.com/ejdr/journal/v26/n4/pdf/ejdr201415a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/ejdr/journal/v26/n4/full/ejdr201415a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:eurjdr:v:26:y:2014:i:4:p:456-472

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/41287/PS2

Access Statistics for this article

The European Journal of Development Research is currently edited by Spencer Henson and Natalia Lorenzoni

More articles in The European Journal of Development Research from Palgrave Macmillan, European Association of Development Research and Training Institutes (EADI) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().