informality - De Andrade, Bruhn and McKenzie (2016)

Question 1

what was there research question

Answer 1

to test
whether government actions work to encourage informal firms to register

Question 2

why did they decide to research this

Answer 2

-Brazil began a process of simplifying firm registration in 1996 by
consolidating multiple taxes and contributions into a single payment and
reduce tax burden.
- Despite these efforts, a 2009 survey data suggests 72% of firms were still
informal
- Survey data also asked reasons for not being formal. This motivated the
authors to design an experiment with a treatment arm eliminating each of
the major reason.

Question 3

what was the research design

Answer 3

Control group: business-as-usual.
- Treatment 1: information on how to formalize with a brochure and a
dedicated helpline.
- Treatment 2: information intervention + exemption in registration fees and
free use of 1 year mandatory accounting services (reducing initial set up
costs).
- Treatment 3: municipal inspectors visited firms.
- Treatment 4: neighbouring firm visited by an inspector
(testing spillover effects).

Question 4

results

Answer 4

• Treatment 1 and 2 had no significant difference in formalization rate as
  compared to the control group.
• Inspections increased municipal registration (formalization) by 3%
  low take up is due to inspectors finding some firms closed, not finding others,
  and from some firms already being formal (measurement error).
• No evidence of spillovers on neigbouring firms because firms said they often