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Increasing Formality and Productivity of Bolivian Firms : Country Studies - World Bank

Increasing Formality and Productivity of Bolivian Firms

Country Studies

Paperback Published: 6th July 2009
ISBN: 9780821380239
Number Of Pages: 138

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Bolivia's informal sector is the largest in Latin America, by many definitions and measures. Bolivia's high informality rate has been blamed on many factors including the burden of regulation, the weakness of public institutions, and the lack of perceived benefits to being formal. The high level of informality has a number of negative implications related to for low productivity, low growth, and low quality of jobs. This book presents fresh ualitative and quantitative analyses to better understand the reasons why firms are informal and the impact of normalization on their profitability, in order to inform policy actions appropriate to the reality of Bolivia. The crucial finding of the analysis is that the impact of tax registration on profitability depends on firm size and the ability to issue tax receipts. The smallest and the largest firms in the sample have lower profits as a result of tax registration because their cost of formalizing exceeds benefits. Firms in the middle range benefit from tax registration in large part due to increasing the customer base by issuing tax receipts. It presents a set of prioritized policy implications for policy makers. In the short term, the priority should be to increase the benefits of formalization through training, access to credit and markets, and business support. The second is to increase information on how to formalize and its benefits. In the medium term, the priority is to simplify formalization, regulatory and taxation procedures and reduce their costs. Increasing even-handed enforcement of taxation and regulation is also important but not a priority for micro and small firms. Measures to boost the productivity of micro and small firms in general will both help overall economic growth, employment, and, formalization.

Prefacep. vii
Abstractp. viii
Acknowledgmentsp. ix
Abbreviations and Acronymsp. x
Executive Summaryp. xii
Overview of Informalityp. xii
Productivity and Profitability of Informal Firmsp. xiii
Policy Recommendationsp. xv
Introduction: Increasing Formality and Productivity of Bolivian Firmsp. 1
What Lies Behind Bolivia's Large Informal Sector?p. 1
How Does this Study Address the Problem?p. 2
Notesp. 4
The Informal Sector in Bolivia Todayp. 5
How Big Is the Informal Sector in Bolivia?p. 5
Who Is in the Informal Sector?p. 10
Why is the Informal Sector so Big?p. 19
Why Should We Care about the Informal Sector?p. 33
Conclusionsp. 35
The complexity of defining informalityp. 36
Sociodemographic characteristics of formal and informal workers under the productive definition, 2005p. 41
Sociodemographic characteristics of formal and informal workers under the legalistic definition, 2005p. 42
Notesp. 42
Detailed information on labor regulation in Latin American countriesp. 43
The Productivity of Micro and Small Firmsp. 45
Why Does Productivity Matter for Micro and Small Firms?p. 45
What Is Constraining the Productivity of Micro and Small Firms?p. 49
How Is the Operational, Regulatory, and Institutional Environment Constraining Productivity?p. 62
Conclusionsp. 65
Notesp. 66
Interest rates for microcredit institutions in Bolivia and other Latin American countries (at end June 2005)p. 68
Informality and Profitability in Micro and Small Firmsp. 69
What Is the Level of Informality among the Surveyed Firms?p. 70
Which Firms Choose to Become Formal?p. 74
How Does Informality Affect Profitability?p. 79
What Are Some of the Channels through which Formality Increase Profits?p. 85
Conclusionsp. 88
What is the scope of the new survey?p. 89
Personal, geographic, and industry characteristics of entrepreneurs holding municipal licenses and tax numbersp. 91
Personal, geographic, and industry characteristics of entrepreneurs who hold municipal licenses and have registered with FundEmpresa or obtained tax numbersp. 92
Estimation methodsp. 93
Impact of a tax number on log profitsp. 95
Impact of a tax number on access to credit and use of financial servicesp. 96
Notesp. 97
Policy Recommendationsp. 98
What Can Be Done to Increase the Formalization of Micro and Small Firms?p. 99
What Can Be Done to Increase Productivity of Micro and Small Firms?p. 104
What is Bolivia Doing Now to Increase Formalization and Productivity?p. 108
Referencesp. 112
Tables
Distribution of Urban employment among formal and informal sectors, by productive and legalistic definitions of informality, 2005 (percentage of total employed population)p. 7
Share of workers covered by labor contracts and pension funds, by firm size, 2005 (percentage of salaried employment)p. 19
Costs and benefits of being formalp. 21
Costs and procedures to set up a business in Latin American countriesp. 24
Detail of costs and procedures to formally set up a business in Boliviap. 25
Tax regulation burden in Latin American countriesp. 27
Labor regulation burden in Latin American countriesp. 29
Percentage of formal firms reporting the following factors as major constraints to their functioning, by sizep. 52
Internal rates of return for a doubling of capital, by sector and genderp. 60
Constraints on firms' productivity posed by the operational, regulatory, and institutional environment, by firm sizep. 62
Percentage of firms registering for tax identification numbers and municipal licenses, by the age of the firm at registrationp. 72
Percentage of formal firms, by dimensions of formality and by industryp. 73
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ISBN: 9780821380239
ISBN-10: 0821380230
Series: Country Studies
Audience: Professional
Format: Paperback
Language: English
Number Of Pages: 138
Published: 6th July 2009
Publisher: World Bank Publications
Country of Publication: US
Dimensions (cm): 24.89 x 17.53  x 1.02
Weight (kg): 0.36

Earn 140 Qantas Points
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