Contract enforcement and the size of the informal economy资料.pdfVIP

Econ Theory (2008) 37:395–416 DOI 10.1007/s00199-007-0295-7 RESEARCH ARTICLE Contract enforcement and the size of the informal economy Erwan Quintin Received: 17 April 2007 / Accepted: 27 September 2007 / Published online: 23 October 2007 © Springer-Verlag 2007 Abstract This paper describes a model where the size of the informal sector decreases as the degree to which financing contracts can be enforced in the formal sector rises. Agents who choose to operate in the informal sector can evade taxes, but they have no access to official means of contract enforcement. Numerical simulations of the model suggest that lax tax enforcement alone does not suffice to generate a large informal sector. Contractual imperfections, on the other hand, can generate a large informal sec- tor and account for several distinguishing features of the organization of production in developing economies. Keywords Limited enforcement · Informal sector · Economic development JEL Classification O17 · O10 1 Introduction The importance of unrecorded, untaxed economic activities varies greatly across nations. As discussed by Schneider and Enste (2000), estimates of unofficial GDP vary from around 10% of GDP in the US or Japan, to as much as 50% in Mexico, even 70% in Thailand. In addition, most empirical studies1 find that country characteristics 1 See for instance Loayza (1996), Johnson et al. (1997, 1998) and Schneider and Enste (2000). I would like to thank Tim Kehoe, Ed Prescott and Manuel Santos for their guidance, and seminar participants at ITAM, the Universidad Torcuato di Tella and the University of Montréal for their valuable comments. The views expressed herein are those of the authors and may not reflect the views of the Federal Reserve Bank of Dallas or the Federal Reserve System. E. Quintin ( ) B Research Department, Federal Reserve Bank of Dallas, 2200 N. Pearl Street, Dallas, TX 75201, USA e-mail: erwan.quintin