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dc.contributor.authorBecker, Dennis
dc.descriptionWP 2014-21 November 2014
dc.descriptionJEL Classification Codes: L2; L5; O17
dc.description.abstractThis paper introduces product-level regulation as a new driver of informality and diversification in a model of heterogeneous multi-product firms and endogenous product choice. Firms face regulations at both the firm- and product-level and may comply with or evade either regulation. The model suggests that firm-level regulation directly causes informality by deterring firm registration. However, the product-level regulation has two effects: it directly drives product informality as evasion of product regulation leading to informality within the formal sector and indirectly deters firms from registering. Further, I demonstrate that the Gini coefficient and Herfindahl index can be implemented in multi-product firm models as revenue-based measures of product diversification. Contrary to the prediction of the commonly used product scope, the revenue-based measures indicate informal firms to be more diversified than formal firms.
dc.publisherCharles H. Dyson School of Applied Economics and Management, Cornell University
dc.subjectheterogeneous firms
dc.titleInformality among multi-product firms

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    Working Papers published by the Charles H. Dyson School of Applied Economics and Management, Cornell University

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