Abstract
The majority of firms in many developing countries are informal. Bolivia has the highest level of informality in Latin America, according to 2007 World Bank data. While there are several levels of registration with the government, firms understand formality as registering for a tax identification number (NIT).
Encuesta de Productividad de Empresas (Survey of Enterprise Productivity) is a detailed firm survey that was carried out in Bolivia in March and April 2007. The study was designed as part of World Bank's economic and sector work (ESW) to understand the costs and benefits of formality. Researchers used GPS coordinates to measure the distance of a firm to the tax registration office, and to control for the distance to the city center and to the municipal registration office. The distance to the tax office was then used as an instrument for formalizing.
The survey covered micro- and small enterprises in four largest cities - La Paz, El Alto, Santa Cruz and Cochabamba - with additional research conducted in several rural areas. Six industries were chosen for the survey: grocery stores, restaurants and food sales, manufacturing of clothing from wool and cloth, transportation of passengers and cargo, manufacturing of clothing from camelid wool (from llamas and alpacas), and manufacturing of furniture from wood. Overall, the survey covered 629 businesses.
