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Small-Business Participation in the Informal Sector of an Emerging Economy

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  • Sandra Sookram
  • Patrick Kent Watson

Abstract

We investigate the characteristics of the owners of small businesses that participate in the informal sector of an emerging economy and their perception of the risk of detection by tax authorities while doing so. Data are gathered from a survey covering 1027 small businesses in Trinidad and Tobago. Results suggest that small business owners are motivated to participate in the informal sector when they believe that the risk of detection by the tax authorities is low and that government regulations are burdensome, but there is no evidence that the tax rate itself is an issue. Their perception of the risk of detection by the tax authority is determined largely by the time they spend and the income they earn in the formal sector.

Suggested Citation

  • Sandra Sookram & Patrick Kent Watson, 2008. "Small-Business Participation in the Informal Sector of an Emerging Economy," Journal of Development Studies, Taylor & Francis Journals, vol. 44(10), pages 1531-1553.
    • Handle: RePEc:taf:jdevst:v:44:y:2008:i:10:p:1531-1553
    DOI: 10.1080/00220380802265520
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    Cited by:

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    3. Saraçoğlu, Dürdane Şirin, 2020. "Do labour market policies reduce the informal economy more effectively than enforcement and deterrence?," Journal of Policy Modeling, Elsevier, vol. 42(3), pages 679-698.
    4. Eghosa Igudia & Robert Ackrill & Simeon Coleman, 2017. "Entrepreneurial Responses to Austerity: The Role of the Informal Sector," NBS Discussion Papers in Economics 2017/09, Economics, Nottingham Business School, Nottingham Trent University.
    5. Dr. Selami Guney, 2011. "The Role Of Accounting And Certified Public Accountants In The Prevention Of The Informal Economy In Turkey," Far East Journal of Psychology and Business, Far East Research Centre, vol. 4(3), pages 27-44, July.
    6. Florencia Verónica Pedroni & Anahí Briozzo & Gabriela Pesce, 2022. "Determinants of unreported income in Latin American companies: a business perspective," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 16(1), pages 58-83.
    7. Dürdane Şirin Saracoğlu, 2017. "Labour Market Policies and the Informal Sector: A Segmented Labour Markets Analysis," ERC Working Papers 1705, ERC - Economic Research Center, Middle East Technical University, revised May 2017.
    8. Eghosa O Igudia, 2020. "Exploring the theories, determinants and policy options of street vending: A demand-side approach," Urban Studies, Urban Studies Journal Limited, vol. 57(1), pages 56-74, January.

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