FIRM MIGRATION TO INFORMALITY AND TRADE
OPENNESS IN DEVELOPING COUNTRIES
LA MIGRACIÓN DE LA FIRMA A LA INFORMALIDAD Y
LA OPORTUNIDAD COMERCIAL EN LOS PAÍSES EN
ABSTRACT: Our main question is why a formal firm becomes informal. We hypothesize that sales behavior and trade openness and are related to this behavior. We present empirical evidence to argue that firm informalization is a strategy conducted to face a downturn in sales. However, the country level of trade openness as a proxy for the average level of managerial abilities of firms reduces the impact of a drop in sales on firm informalization. For this purpose, we draw upon data from 636 firms in 12 developing countries from World Bank surveys and apply a simultaneous equation framework with a dichotomous dependent variable.
KEYWORDS: Informality, Developing economies, Trade openness.
CLASIFICACIÓN JEL: O17, F10, L20.
AUTORES: Mónica Cueto & Erick Gómez
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