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Recruitment Seminar presented by Gabriel Uylssea

17 January 2020, 2:00 pm–4:00 pm

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Formal and Informal Firm Dynamics

Event Information

Open to

All

Organiser

Economics Reception

Location

124 Gideon Schreier
Bentham House
4-8 Endsleigh Gardens
London
WC1H 0EG

Abstract: How does informality affect firm selection and growth over the life cycle? What are the consequences for the (mis)allocation of resources, productivity and output? I develop and estimate a model of firm dynamics in which heterogeneous firms selfselect into two margins of informality: (i) whether firms register their business, the extensive margin; and (ii) whether formal firms hire informal workers, the intensive margin. I use the estimated model to show that, once both margins of informality are accounted for, Brazil goes from displaying moderate firm growth (e.g. Mexico) to near stagnation (e.g. India). Increasing enforcement on informal firms strengthens the "up or out" dynamics, leading to higher average life cycle growth and higher growth rates among "superstar" firms. It also generates substantial gains in allocative efficiency, aggregate productivity and total output.

Paper available

About the Speaker

Gabriel Uylssea

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