American Economic Association Nashville, Tennessee 0022-0515 Journal of Economic Literature 38 1 March 2000 1144 Manufacturing Firms in Developing Countries: How Well Do They Do, and Why? James R.Tybout The manufacturing sectors of developing countries have traditionally been relatively protected. They have also been subject to heavy regulation, much of which has favored large firms. Accordingly, it is often argued that in these countries: (1) markets tolerate inefficient firms, so cross-firm productivity dispersion is high; (2) small groups of entrenched oligopolists exploit monopoly power in product markets; and (3) many small firms are unable or unwilling to grow, so important scale economies go unexploited. Drawing on plant and firm level studies, I assess each of these conjectures and find none to be systematically supported. However, many open issues remain. http://www.aeaweb.org/journal/contents/March2000.html American Economic Association Nashville, Tennessee 0022-0515 Journal of Economic Literature 38 1 March 2000 4576 The Economic Theory of Public Enforcement of Law A. MitchellPolinskyStevenShavell This article surveys the theory of the public enforcement of law--the use of public agents (inspectors, tax auditors, police, prosecutors) to detect and to sanction violators of legal rules. We first present the basic elements of the theory, focusing on the probability of imposition of sanctions, the magnitude and form of sanctions, and the rule of liability. We then examine a variety of extensions of the central theory, concerning accidental harms, costs of imposing fines, errors, general enforcement, marginal deterrence, the principal-agent relationship, settlements, self-reporting, repeat offenders, imperfect knowledge about the probability and magnitude of fines, and incapacitation. http://www.aeaweb.org/journal/contents/March2000.html American Economic Association Nashville, Tennessee 0022-0515 Journal of Economic Literature 38 1 March 2000 77114 Shadow Economies: Size, Causes, and Consequences FriedrichSchneiderDominik H.Enste Using various methods, the size of the shadow economy in 76 developing, transition, and OECD countries is estimated. Average size varies from 12 percent of GDP for OECD countries, to 23 percent for transition countries and 39 percent for developing countries. Increasing taxation and social security contributions combined with rising state regulations are driving forces for the increase of the shadow economy, especially in OECD countries. According to some findings, corruption has a positive impact on the size of the shadow economy, and a growing shadow economy has a negative effect on official GDP growth. http://www.aeaweb.org/journal/contents/March2000.html