[Related to the Apply the Concept on page 263]
According to research by Rafael La Porta of Tuck School
of Business at Dartmouth and Andrei Shleifer of Harvard
University, in developing countries, the average firm in
the informal sector, or underground economy, employs
4 workers as opposed to 126 workers employed by the
average firm in the formal sector.
a. What is the informal sector, or underground economy?
b. Why would we expect firms in the informal sector to
be so much smaller than firms in the formal sector?