B1 - [Farias & Rocha 2021] - Formality Costs, Registration and Development of Microentrepreneurs: Evidence from Brazil
ANALYSIS OF ARTICLE The Article main merit is to provide an empirical study corroborating with the literature that indicates that rate of formality firms increases if registration costs, and taxes reduce. It also indicates that formalization has no effect on their TFP. The Authors analyze the effects of the implementation of the MEI Program in Brazil (MEI = Individual Microentrepreneur) from its establishment in 2009 till 2015. Six million new firms were formalized during such period, and the authors try to demonstrate that the effect is net of other possible movements on formal / informal labor forces. New data from 2021 shows that now 11M MEIs are registered since 2009, and 90% of those firms are active. Phenomena is based on the low registration and tax costs, with microentrepreneurs choosing to formalize their situation as they can be part of the safety net (with some limited benefits), as well as being out of illegality as well as able to take credit lines and formally invoi...