Informal Sector , Government Policy and Institutions

  title={Informal Sector , Government Policy and Institutions},
  author={S. Bora 1⁄4 gan Aruoba},
  • S. Bora 1⁄4 gan Aruoba
  • Published 2009
We document cross-country di¤erences in informal activity, government policies and institutions using a data set covering 118 countries. Five key facts emerge: better institutions are associated with lower in‡ation, higher income tax rates and less informal activity and higher levels of informal activity are associated with lower income tax rates and higher in‡ation. We develop a general equilibrium model where households optimally choose the extent of informal activity and a benevolent… CONTINUE READING

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