We exploit data from the Mexican establishment census and show that informal plants grow along their life cycle at significantly lower rates compared to formal plants. To quantify the aggregate losses from the marked differences in growth rates between formal and informal plants, we develop a general equilibrium model where plants grow by investing on their productivity and informality arises as a result of incomplete enforcement. In equilibrium, informal plants exhibit flatter life cycle profiles to avoid detection and thus lower their tax burden. Full enforcement of the tax while reducing the rate to keep the tax-to-output ratio constant would increase aggregate output by 8 percent relative to the benchmark. Average plant size would increase by 36%, and the average plant would grow at a pace almost 50% faster.