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on Informal and Underground Economics |
| By: | Rao, R. Kavita (National Institute of Public Finance and Policy); Tandon, Suranjali (National Institute of Public Finance and Policy) |
| Abstract: | The paper presents a model for tax compliance based on prospect theory wherein an individual makes the decision whether to file, and declare a certain amount of income, or to not file based on a set of policy parameters as well as his/her preferences. The paper poses the question- at what incomes would individuals choose to file a return and answers the same using a model based on prospect theory. Further, simulations are presented to illustrate the impact of changes in tax rates, penalty and audit probability on the individual's preference to file. The results from the simulation show that for different values of policy parameters there exists crossover income at which individuals would choose to file a return. Given all else, at the exemption threshold of 0.1 million, individuals would choose to file a return at incomes greater than or equal to 0.6 million. |
| Keywords: | prospect theory ; compliance ; tax ; exemption threshold ; crossover income |
| JEL: | H26 H31 D11 K42 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:npf:wpaper:16/169&r=iue |
| By: | Mawejje, Joseph; Munyambonera, Ezra |
| Abstract: | This paper contributes to a growing strand of literature on the determinants of tax revenue performance in developing countries, particularly in Sub-Saharan Africa. More specifically we estimate the tax elasticities of sectoral output growth and public expenditure. The unique features of this paper are twofold: First we develop a simple analytical model for tax revenue performance taking into account some structural features pervasive in most developing countries with large informal sectors. Second we test the model predictions on Ugandan time series data using ARDL bounds testing techniques. Results indicate that dominance of the agricultural and informal sectors pose the largest impediments to tax revenue performance. In addition development expenditures, trade openness, and industrial sector growth are positively associated with tax revenue performance. We propose policies to support the development of value added linkages between agricultural and industrial sectors while emphasizing the need to unlock the potentially large contributions of the informal sector with a view of widening the tax base. |
| Keywords: | Consumer/Household Economics, Financial Economics, Industrial Organization, Institutional and Behavioral Economics, International Relations/Trade, Labor and Human Capital, Public Economics, |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:ags:eprcrs:234555&r=iue |
| By: | Madrigal, Lucia (Inter-American Development Bank); Pagés, Carmen (Inter-American Development Bank); Suaya, Agustina (Inter-American Development Bank) |
| Abstract: | As the population ages, low and unequal social security coverage are among the most pressing challenges in the Latin American region. On average, only 45% of workers contribute to social security, and this figure is much lower for low-income and low-skilled individuals. There are many hypotheses for this limited and uneven coverage. This paper studies two of them: First, we test whether individuals do not contribute to social insurance because, due to myopia or limited information, they place little value in social insurance. Second, we test whether low-income, low-skilled individuals have a lower value of social insurance than higher-income or higher-skilled individuals. Using an indirect method to estimate individual social security valuation based on self-reported job satisfaction, we find that workers attain higher job satisfaction in formal than in informal jobs in Peru but not in the case of Mexico. In addition, we find little evidence that the value of social insurance increases with income or education. If anything, the opposite is the case, with lower-income or lower-education individuals deriving higher utility from having access to social insurance. |
| Keywords: | job satisfaction, informality, social insurance, Latin America |
| JEL: | J21 J28 O17 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9866&r=iue |
| By: | Hrvoje Butkovič; Ivana Čavar; Višnja Samardžija; Ivana Skazlić |
| Abstract: | This report was financed by European Comission grant no. VS/2014/0534. |
| Date: | 2016–04–18 |
| URL: | http://d.repec.org/n?u=RePEc:cel:report:15&r=iue |
| By: | Birthal, Pratap S.; Chand, Ramesh; Joshi, Pramod Kumar; Saxena, Raka; Rajkhowa, Pallavi; Khan, Md. Tajuddin; Khan, Mohd Arshad; Chaudhary, Khyali R. |
| Abstract: | Despite a growing dairy industry in India, farmers’ lack of access to organized markets and institutional credit remains one of the major hindrances in improving the scale and productivity of dairying. Using data from a survey of 612 households from the state of Punjab, India, this paper evaluates farmers’ choices of dairy value chains and their financing mechanisms. The study finds that 62 percent of the sample farmers representing 69 percent of the total milk sales are connected with formal value chains driven by cooperatives, multinational companies and private domestic processors. Small dairy farmers are associated more with informal value chains but they are not excluded from the formal value chains. The performance of different value chains in terms of productivity and profitability of dairying is almost on par. Also, there is hardly any difference in the milk price offered by formal and informal buyers pointing towards milk market being competitive. More than half of the farmers borrow credit both from within and outside the chain for dairying related activities. Chain-based financing is restricted to only one-fourth of the borrowers and mostly to those associated with informal value chains. Financing by commercial banks and other financial institutions is limited to only 9 percent of the borrowers, mainly larger farmers. The socially-disadvantaged and smallholder farmers are often neglected in institutional lending because of their lack of physical assets to use as collateral against loans. Value chain approach, due to its product market orientation, can serve as an entry point for financial institutions to improve their outreach to smallholders. The innovative financial products, such as ‘dairy credit card’ and ‘contract as collateral’ would enable them to adopt yield-enhancing technology and inputs and also to scale up their dairy activity. |
| Keywords: | finance, dairy, credit, smallholders, informal sector, markets, economic development, microeconomics, value chains, |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1513&r=iue |
| By: | Turvey, Calum G.; Kumar, Chandra; Rong, Kong |
| Abstract: | Though informal lending and borrowing are widely prevalent among close acquaintances in rural areas of developing economies, these informal transactions have not been extensively researched. As it stands, a risk sharing motive has been advanced as an important explanation of such informal exchanges. However, this fails to incorporate social preferences such as altruism, trust, reciprocity and fairness. The primary contribution of this paper is to investigate fairness reciprocity as an important motive underlying informal financial transactions among relatives and friends. Evidence from China and India suggests that fairness can be advanced as an important motive in informal financial transactions. |
| Keywords: | Fairness, Reciprocity, Mutual-min, Mutual-max, Informal Lending, Familial lending, Agriculture, China and India, Agribusiness, Farm Management, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae15:212625&r=iue |