Journal of Economic Literature
Vol. 38, No. 1, March 2000
Contents
Manufacturing Firms in Developing Countries: How Well
Do They Do, and Why?
James Tybout 11
The Economic Theory of Public Enforcement of Law
A. Mitchell Polinsky and Steven Shavell 45
Shadow Economies: Size, Causes, and Consequences
Friedrich Schneider and Dominik H. Enste 77
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Manufacturing Firms in Developing Countries: How Well Do They Do, and
Why?
James 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.
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The Economic Theory of Public Enforcement of Law
A. Mitchell Polinsky and Steven Shavell
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.
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Shadow Economies: Size, Causes, and Consequences
Friedrich Schneider and Dominik 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.
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