EXTENT AND GROWTH EFFECTS OF INFORMALITY IN TURKEY: EVIDENCE FROM A FIRM-LEVEL SURVEY

Abstract

In this paper, we provide a measure for both the prevalence and growth effects of informality in Turkey using firm-level data from the Turkish Economy. The survey is conducted in April–May 2013 covering 1000 representative firms interviewing owners/head managers of the firms. Based on the information given by these owners and managers, the survey makes a complete characterization of several firm characteristics, provides complete information on the extent of informality as well as its effects on various economic outcomes of these firms. The cross-sectional econometric analysis we conduct using the survey data shows that there is an inverted-U relationship between a specific measure of informality and growth expectations of firms. These results shed light on our understanding of the specific channels through which informality affects firms’ growth not only in Turkey but in other emerging markets as well.