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on Informal and Underground Economics |
| By: | Di Nola, Alessandro; Kocharkov, Georgi; Vasilev, Aleksandar |
| Abstract: | We evaluate the relative importance of aggregate labor productivity versus income taxes and social contributions for tax compliance in an economy with a large degree of informality. Empirical evidence points out that tax evasion in Europe happens through partially concealing wages and profits in formally registered enterprises. To this end, we build a model in which employer-employee pairs of heterogeneous productive capacities make joint decisions on the degree of tax evasion. The quantitative model is used to analyze the case of Bulgaria which has the largest informal economy in Europe and underwent a number of important tax reforms over the period 2000-2014, including the introduction of a flat income tax in 2008. The estimation strategy relies on matching the empirical series for the size of the informal economy and other aggregate outcomes for 2000-2014. Our counterfactual experiments show that the most important factor for the changing size of the informal economy is labor productivity, which accounts for more than 75% of the change. The variation in corporate income tax accounts for the rest. We find that the 2008 flat tax reform did not play any visible role in coping with informality. |
| Keywords: | Envelope wages, hidden production, informal economy, flat tax reform |
| JEL: | E6 E65 H24 H26 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:91945&r=all |
| By: | Samuel Bentolila; Juan Jose Dolado; Juan F. Jimeno |
| Abstract: | This paper provides an overview of recent research on dual labour markets. Theoretical and empirical contributions on the labour-market effects of dual employment protection legislation are revisited, as well as factors behind its resilience and policies geared towards correcting its negative consequences. The topics covered include the stepping-stone or dead-end nature of temporary contracts, their effects on employment, unemployment, churn, training, productivity growth, wages, and labour market inflows and outflows. The paper reviews both theoretical advances and relevant policy discussions, in particular in several countries that had very poor employment performance during the recent global economic and financial crisis. |
| Keywords: | dual labour markets, employment protection, temporary contracts, job creation, job destruction, churn |
| JEL: | J23 J32 J63 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7479&r=all |
| By: | Christos Kotsogiannis (Tax Administration Research Centre (TARC); University of Exeter); Xavier Mateos-Planas (Centre for Macroeconomics (CFM); Queen Mary University of London) |
| Abstract: | This paper studies income-tax evasion in a quantitative incomplete-markets setting with heterogeneous agents. A central aspect is that, realistically, evaded taxes are a form of contingent debt. Since evasion becomes part of a portfolio decision, risk and credit considerations play a central part in shaping it. The model calibrated to match estimated average levels of evasion does a good job in producing observed cross-sectional average evasion rates that decline with age and with earnings. The model also delivers implications for how evasion varies in the cross sectional distribution of wealth and tax arrears. Evasion has substantial effects on macroeconomic variables and welfare, and agent heterogeneity and general equilibrium are very important elements in the explanation. The analysis also considers the response of evasion to a flat-tax policy reform. In spite of the direct incentives to evade less under a flat tax rate, the reform causes households to save more, rendering the change in overall evasion modest. |
| Keywords: | Tax evasion, Contingent debt, Incomplete markets with heterogeneous agents, Portfolio choice, Risk sharing, Tax progressivity |
| JEL: | E2 E62 H3 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:1903&r=all |
| By: | Serge Ky (LAPE - Laboratoire d'Analyse et de Prospective Economique - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société - UNILIM - Université de Limoges); Clovis Rugemintwari (LAPE - Laboratoire d'Analyse et de Prospective Economique - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société - UNILIM - Université de Limoges); Alain Sauviat (LAPE - Laboratoire d'Analyse et de Prospective Economique - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société - UNILIM - Université de Limoges) |
| Abstract: | Access to and usage of formal financial services are important determinants of financial inclusion and yet, informal mechanisms still dominate the financial system in developing countries. In this context, the purpose of our paper is to investigate how the growing effort to harness mobile money may play a role to overcome barriers that prevent people to access formal financial services. Using a unique dataset obtained from an individual-level survey conducted in Burkina Faso, we explore the interplay between mobile money innovation as a deposit instrument and pre-existing formal and informal financial instruments. Our main findings show that, overall, the use of mobile money is not associated with deposits using formal and/or informal financial instruments. However, a closer investigation reveals suggestive evidence that it increases the probability of participants in informal mechanisms to make deposits in a bank account. Moreover, considering disadvantaged groups, we find for women, irregular income and less educated individuals that mobile money may increase their probability to make deposits in a bank and/or credit union accounts. Given the low access to formal financial services in developing countries, our findings taken together indicate how the increasing adoption of mobile money may act as a stepping-stone towards financial inclusion. |
| Keywords: | developing countries †,financial inclusion,mobile money,formal finance,informal finance,deposit behavior |
| Date: | 2019–02–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02000982&r=all |