Informal sector, regulatory compliance, and leakage

• 成果类型: Article
• 署名作者: Baksi, Soham; Bose, Pinaki
• 署名单位: University of Winnipeg; University of Manitoba
• 刊物名称: JOURNAL OF DEVELOPMENT ECONOMICS
• ISSN/ISSBN: 0304-3878
• DOI: 10.1016/j.jdeveco.2016.03.008
• 发表日期: 2016
• 页码: 166-176
• 关键词: Formal and informal sectors; Emission intensity reduction; price discrimination; Regulatory compliance

摘要

The paper models a vertically related formal and informal sector, and endogenizes the size and regulatory compliance status of the informal sector. When the formal sector can circumvent costly regulations by outsourcing polluting intermediate goods from the informal sector, stricter regulations increase (when the composition effect of regulation dominates its scale effect) or decrease total pollution, and may even have a non-monotonic impact. We identify conditions under which a partially compliant informal sector acts as a source of leakage, and examine implications for optimal enforcement policy. Further, we show that price discrimination by the formal sector, when it purchases the intermediate goods from the informal sector, can worsen regulatory compliance by the informal sector and lead to more pollution. (C) 2016 Elsevier B.V. All rights reserved.