Is informality a barrier to financial development?
Elgin,C. Uras,R.B.
Elgin,C.
Uras,R.B.
Abstract
This study investigates the relationship between financial development and the size of the informal economy. We build a model in which an exogenous variation in the size of the informal sector creates two effects on financial development. Specifically, informal sector harms financial development through increasing financial repression due to tax evasion. However, on the other hand, increasing informal sector size facilitates financial development through easing the capacity constraint on the financial sector. Using a cross-country panel data set of 152 countries over the period 1999–2007 we also provide empirical support for the mechanism of our theory.
Description
Date
2013
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
Organizational Units
Journal Issue
Keywords
SDG 8 - Decent Work and Economic Growth, SDG 17 - Partnerships for the Goals
Citation
Elgin, C & Uras, R B 2013, 'Is informality a barrier to financial development?', Journal of the Spanish Economic Association, vol. 4, no. 3, pp. 309-331. < http://10.1007%2Fs13209-012-0092-9# >