Public financing with financial frictions and underground economy

e-Archivo Repository

Show simple item record Erosa, Andrés Fuster, Luisa Martinez, Tomás R.
dc.contributor.editor Universidad Carlos III de Madrid. Departamento de Economía 2021-07-08T11:12:36Z 2021-07-08T10:17:55Z 2021-04-27
dc.identifier.issn 2340-5031
dc.description.abstract What are the aggregate effects of informality in a financially constrained economy? We develop and calibrate an entrepreneurship model to data on matched employer-employee from both formal and informal sectors in Brazil. The model distinguishes between informality on the business side (extensive margin) and the informal hiring by formal firms (intensive margin). We find that when informality is eliminated along both margins, aggregate output increases 9.3%, capital 14.7%, TFP 5.4%, and tax revenue37%. The output and TFP increases would be much larger if informality were only eliminated on the extensive margin, a result that supports the view that the informal economy can play a positive role in an economy with financial frictions. Finally, we find that the output cost of financing social security in our baseline model is about twice as large as the one in an economy with no frictions.
dc.language.iso eng
dc.relation.ispartofseries Working paper. Economics
dc.relation.ispartofseries 21-04
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.subject.other Occupational Choice
dc.subject.other Informality
dc.subject.other Financial Frictions
dc.subject.other Social Security
dc.subject.other Tax Revenue
dc.title Public financing with financial frictions and underground economy
dc.type workingPaper
dc.subject.jel E22
dc.subject.jel E26
dc.subject.jel H20
dc.subject.jel H55
dc.subject.jel L26
dc.subject.jel O16
dc.subject.eciencia Economía
dc.rights.accessRights openAccess
dc.type.version submitedVersion
dc.identifier.uxxi DT/0000001917
dc.affiliation.dpto UC3M. Departamento de Economía
 Find Full text

Files in this item

*Click on file's image for preview. (Embargoed files's preview is not supported)

The following license files are associated with this item:

This item appears in the following Collection(s)

Show simple item record