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This paper estimates the size of the informal economy for 32 mainly Latin American and Caribbean countries in the early 2000s. Using a structural equation modeling approach, we find that a stringent tax system and regulatory environment, higher inflation, and dominance of the agriculture sector are key factors in determining the size of the informal economy. The results also confirm that a higher degree of informality reduces labor unionization, the number of contributors to social security schemes, and enrollment rates in education.

Taxation --- Informal sector (Economics) --- Econometric models --- Econometric models. --- Hidden economy --- Parallel economy --- Second economy --- Shadow economy --- Subterranean economy --- Underground economy --- Duties --- Fee system (Taxation) --- Tax policy --- Tax reform --- Taxation, Incidence of --- Taxes --- Artisans --- Economics --- Small business --- Finance, Public --- Revenue --- Macroeconomics --- Money and Monetary Policy --- Economics: General --- Agribusiness --- Informal Economy --- Underground Econom --- Labor Economics: General --- Taxation, Subsidies, and Revenue: General --- Agriculture: General --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Economics of specific sectors --- Labour --- income economics --- Public finance & taxation --- Agricultural economics --- Monetary economics --- Informal economy --- Labor --- Tax incidence --- Agricultural sector --- Currencies --- Informal sector --- Labor economics --- Tax administration and procedure --- Agricultural industries --- Money --- Trinidad and Tobago

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Over the last decade, empirical studies analyzing macroeconomic conditions that may affect the size of government spending multipliers have flourished. Yet, in spite of their obvious public policy importance, little is known about public investment multipliers. In particular, the clear theoretical implication that public investment multipliers should be higher (lower) the lower (higher) is the initial stock of public capital has not, to the best of our knowledge, been tested. This paper tackles this empirical challenge and finds robust evidence in favor of the above hypothesis: countries with a low initial stock of public capital (as a proportion of GDP) have significantly higher public investment multipliers than countries with a high initial stock of public capital. This key finding seems robust to the sample (European countries, U.S. states, and Argentine provinces) and to the identification method (Blanchard-Perotti, forecast errors, and instrumental variables). Our results thus suggest that public investment in developing countries would carry high returns.

Investments: General --- Investments: Stocks --- Macroeconomics --- Public Finance --- Investment --- Capital --- Intangible Capital --- Capacity --- Business Fluctuations --- Cycles --- Fiscal Policy --- National Government Expenditures and Related Policies: Infrastructures --- Other Public Investment and Capital Stock --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- National Government Expenditures and Related Policies: General --- Macroeconomics: Consumption --- Saving --- Wealth --- Public finance & taxation --- Investment & securities --- Public investment spending --- Stocks --- Expenditure --- Government consumption --- Private investment --- Financial institutions --- National accounts --- Public investments --- Expenditures, Public --- Consumption --- Economics --- Saving and investment --- United States