Corbellini, Nicola2024-08-222024-08-222024-06https://hdl.handle.net/11299/265117University of Minnesota Ph.D. dissertation. June 2024. Major: Economics. Advisor: V.V. Chari. 1 computer file (PDF); ix, 69 pages.This dissertation consists of two chapters. In Chapter 1, I investigate the following question: how does tax enforcement affect the firm size distribution and total factor productivity (TFP)? To answer this question, I develop a quantitative model characterized by heterogeneous agents who choose whether to be workers, entrepreneurs in the formal sector, or entrepreneurs in the informal sector. Informal entrepreneurs do not pay taxes but face a probability of detection that is increasing in firm size. In the model, stricter tax enforcement results in lower informality and affects the firm size distribution and TFP through two mechanisms: as tax enforcement becomes stricter, fewer relatively unproductive agents choose to be entrepreneurs, and fewer entrepreneurs choose to operate in the informal sector. Using data from Brazil, I calibrate the model and estimate that a counterfactual tax enforcement that reduces the informality rate from 36% to 30% of total output—the value measured in the weighted average of the six largest Latin American economies—would account for about 9% and 28% of the observed differences in TFP and average firm size. Chapter 2 concerns definitions and measurements of informality, with a particular emphasis on Brazil. I describe the two main approaches for measuring informality and highlight their respective advantages and disadvantages. I then illustrate the evolution of business and employment informality in Brazil over the past 20 years. While there has been a general downward trend, starting in 2014, informality has slightly increased. The observed rise in informality is consistent with the counter-cyclical pattern documented in previous studies. Finally, I employ several data sources to estimate the share of informal value added in Brazil in 2003. The figures obtained are marginally lower than those estimated using indirect measures. Nonetheless, if extended across time, my approach would more accurately capture short-term fluctuations in informality.enAggregate ProductivityFirm SizeInformalityTax EnforcementThesis or Dissertation