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This article estimates the impact of informality on profits using a new survey administered to 1,200 firms with less than 50 employees in four cities in Ecuador. The article proposes a novel definition of informality which explicitly recognises that most firms comply with some regulations but not others. Accounting for firm selection and controlling for a large set of firm, owner and location characteristics, the article finds that more formal firms tend to be more profitable and have higher output per worker. This impact operates, inter alia, through improved access to credit and higher sales through issuance of tax receipts. [ABSTRACT FROM AUTHOR]

Summary: This paper investigates the effects of preferential trade agreements (PTAs) on net FDI inflows of member countries using a comprehensive database of PTAs in a panel setting. PTA membership is associated with a positive change in net FDI inflows and FDI gains increase with the market size of PTA partners and their proximity to the host country. The estimated relationship is driven by the developing countries in the sample and agreements signed in the late 1990s–early 2000s, a period when the majority of “deep integration” PTAs have been advanced. [ABSTRACT FROM AUTHOR]

The COVID-19 pandemic accelerated the digital transformation of businesses. Using a unique global panel dataset, this paper documents the patterns of digital adoption during the pandemic across firms in 57 (mostly developing) countries. The data show the tale of two stories. On one hand, the pandemic drove firms to increase the use of digital platforms and invest in digital solutions. On the other hand, the digital divide increased across several dimensions. There remain substantial gaps between small and large firms as well as across sectors, particularly for new investments in digital solutions. Firms that did not use any digital platform or channel before the pandemic, also lagged in their response to the pandemic, increasing the gap with those that were more digitally ready. Moreover, although the share of online sales across firms for all size groups increased, there is a growing concentration of online sales among top firms. The paper analyzes some of the factors associated with this increase in the digital divide and discusses the policy implications addressing the widening digital divide and leveraging the benefits of rapid digitalization. [ABSTRACT FROM AUTHOR]