The Impact of Regulation on Growth and Informality Cross-Country Evidence

22 Pages Posted: 14 Jul 2005

See all articles by Norman Loayza

Norman Loayza

World Bank - Research Department

Ana Maria Oviedo

University of Maryland - Department of Economics; University of Warwick

Luis Servén

World Bank - Development Research Group (DECRG)

Date Written: June 2005

Abstract

This paper studies the effects of regulation on economic growth and the relative size of the informal sector in a large sample of industrial and developing countries. Along with firm dynamics, informality is an important channel through which regulation affects macroeconomic performance and economic growth in particular. The paper concludes that a heavier regulatory burden - particularly in product and labor markets - reduces growth and induces informality. These effects are, however, mitigated as the overall institutional framework improves.

Keywords: Regulation, government performance, economic growth, informal economy

JEL Classification: K20, K30, H11, O40, O17

Suggested Citation

Loayza, Norman and Oviedo, Ana Maria and Servén, Luis, The Impact of Regulation on Growth and Informality Cross-Country Evidence (June 2005). World Bank Policy Research Working Paper No. 3623. Available at SSRN: https://ssrn.com/abstract=755087 or http://dx.doi.org/10.2139/ssrn.755087

Norman Loayza (Contact Author)

World Bank - Research Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Ana Maria Oviedo

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

University of Warwick

Coventry CV4 7AL
United Kingdom

Luis Servén

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

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