An empirical firm-level analysis of informality and corruption. evidence from Argentina

Abstract

Informality is a widespread phenomenon. In countries like Argentina over a third of its total output is produced in the informal sector. Effects of informality on growth are diverse and are very well documented. By testing the channels through which corrup tion and firm size affect the size of the informal sector, I find a reciprocal relationship between informality and corruption and a U-shape relationship between informality and firm size. I believe these results reveal important insights for the design of policies aimed at reducing the share of unreported sales.