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The Unofficial Economy and Economic Development | NBER
Source: nber.org
Article summary:
1. Informal firms account for about half of all economic activity in developing countries.
2. Three broad views exist on the role of informal firms in economic development: romantic, parasite, and dual.
3. Evidence from World Bank firm level surveys suggests that informal firms are small and unproductive compared to formal firms, and that growth comes from the creation of highly productive formal firms.
Article analysis:
The article provides a comprehensive overview of the role of informal firms in economic development, exploring three different views on their impact. The evidence presented is based on data from World Bank firm level surveys, which is reliable and trustworthy. However, there are some potential biases present in the article that should be noted. For example, the article does not explore counterarguments or present both sides equally; it only presents one view (the dual view) as being correct without considering other perspectives or evidence to support them. Additionally, the article does not discuss any possible risks associated with informal firms or how they could potentially contribute to economic growth if given more support and resources by governments. Finally, there is a lack of evidence provided for some of the claims made in the article; while it states that formal firms are run by better educated managers and use more capital than informal ones, it does not provide any data to back up this claim. In conclusion, while this article provides an interesting overview of the role of informal firms in economic development, it should be read with caution due to its potential biases and lack of evidence for some claims made.