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on Informal and Underground Economics |
| By: | Paolo Pellizzari (Department of Economics, University Of Venice Cà Foscari); Dino Rizzi (Department of Economics, University Of Venice Cà Foscari); ; |
| Abstract: | We develop a model where heterogeneous agents maximize their individual utility based on (after tax) income and on the level of public expenditure (as in Cowell, Gordon, 1988). Agents are different in risk aversion and in the relative preference for public expenditure with respect to personal income. In each period, an agent can optimally conceal some income based on conjectures on the perceived probability of being subject to audits, the perceived level of public expenditure and the perceived amount of tax paid by other individuals. As far as the agent-based model is concerned, we assume that the Government sets the tax rate and the penalties, uses all the revenue to finance public expenditure (with no inefficiency) and fights evasion by controlling a (random) fraction of agents. We show that, through computational experiments based on micro-simulations, stable configurations of tax rates and public expenditure endogenously form in this case as well. In such equilibrium-like situations we find: • a positive relationship between the tax rate and evasion still arises. • tax compliance mainly depends on the distribution of personal features like risk-aversion and the degree of preference for public expenditure. • an endogenous level of tax evasion that is almost not affected by reasonable rates of control. A proper choice of the tax rate results instead in voluntary partial compliance. • the enforcement of higher compliance rates requires unrealistic and costly large-scale audits. |
| Keywords: | Tax evasion, public expenditure, agent-based models |
| JEL: | H26 H40 C63 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2011_15&r=iue |
| By: | Diego Martínez López (Dpto. Economía, Mét. Cuantitativos e H.ª Econ.) |
| Abstract: | This paper offers estimates of the underreporting of income by self-employed workers using the Spanishhousehold surveys over the period 2006-2009. We use the well-known model by Pissarides and Weber (1989)but extending its interpretation for admitting also the (lower) concealment of income by salary workers. Ourresults show that the reported income by self-employed has to be increased by about 25-30 percent to obtainthe level of income which would equal the level of underreporting by employees. Our estimates are robust tochanges in specification, endogeneity and non-linearities. Este artículo ofrece estimaciones de la ocultación de rentas por parte de los trabajadores autónomosespañoles usando Encuestas de Presupuestos Familiares en el periodo 2006-2009. Para ello empleamos elconocido modelo de Pissarides y Weber (1989), cuya interpretación extendemos para admitir también la(menor) ocultación de renta por parte de los trabajadores asalariados. Nuestros resultados muestran que larenta reconocida por los trabajadores autónomos españoles debe incrementarse entre un 25 y 30 por cientopara obtener el nivel de renta que igualaría el grado de ocultación de los empleados. Dichas estimacionesson robustas a cambios en la especificación, endogeneidad y no linealidades. |
| Keywords: | ocultación, encuestas familiares, consumo de comida, evasión fiscal. underreporting, household surveys, food consumption, tax evasion |
| JEL: | D12 H26 O17 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasec:2011-09&r=iue |
| By: | Giles, John; Wang, Dewen; Cai, Wei |
| Abstract: | This paper highlights the employment patterns of China's over-45 population and, for perspective, places them in the context of work and retirement patterns in Indonesia, Korea, the United States, and the United Kingdom. As is common in many developing countries, China can be characterized as having two retirement systems: a formal system, under which urban employees receive generous pensions and face mandatory retirement by age 60, and an informal system, under which rural residents and individuals in the informal sector rely on family support in old age and have much longer working lives. Gender differences in age of exit from work are shown to be much greater in urban China than in rural areas, and also greater than observed in Korea and Indonesia. Descriptive evidence is presented suggesting that pension eligible workers are far more likely to cease productive activity at a relatively young age. A strong relationship between health status and labor supply in rural areas is observed, indicating the potential role that improvements in access to health care may play in extending working lives and also providing some basis for a common perception that older rural residents tend to work as long as they are physically capable. The paper concludes with a discussion of measures that may facilitate longer working lives as China's population ages. |
| Keywords: | Labor Markets,Labor Policies,Population Policies,Pensions&Retirement Systems,Work&Working Conditions |
| Date: | 2011–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5853&r=iue |
| By: | María Angélica Arbeláez; Roberto Steiner; Alejandro Becerra; Daniel Wills |
| Abstract: | Using the 2003 and 2008 Quality of Life Surveys, we identify the factors that affect housing tenure decisions in Colombia and explore the determinants of the demand for rentals and purchases. Variables affecting the choice between buying and renting include civil status, education, age of the household head, size of the household and whether the household resides in an urban area. Households with higher income are more likely to purchase than to rent and the choice of formal housing is positively associated to wealth. Interestingly, households eligible for social housing subsidies are more likely to purchase than to rent and those working in the informal sector are more likely to purchase informal dwellings. Demand is quite responsive to price changes as well as to changes in the price of rental (its closest substitute). The elasticity to permanent income for both buying and renting is similar to that observed in other developing countries, and is higher for those working in the informal sector. This suggests that subsidies and other interventions aimed at fostering demand should not exclude those holding informal sector jobs. Demand is highly responsive to positive shocks to income, a fact probably associated with credit constraints being binding. Subsidies have a large positive impact on demand. Likewise, access to mortgage credit is an important determinant of demand. Finally, savings have a positive effect on demand in 2008, not in 2003. A plausible explanation is that a policy intervention that began in 2000 –i.e, a tax exemption for households that established savings accounts destined for housing purchases— only had an effect in the upper part of the business cycle. In both cases (i.e. subsidies and credit) the positive effect on demand is entirely explained by demand for social housing. |
| Date: | 2011–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:col:000124:009056&r=iue |
| By: | María Angélica Arbeláez; Roberto Steiner; Alejandro Becerra; Daniel Wills |
| Abstract: | Using the 2003 and 2008 Quality of Life Surveys, we identify the factors that affect housing tenure decisions in Colombia and explore the determinants of the demand for rentals and purchases. Variables affecting the choice between buying and renting include civil status, education, age of the household head, size of the household and whether the household resides in an urban area. Households with higher income are more likely to purchase than to rent and the choice of formal housing is positively associated to wealth. Interestingly, households eligible for social housing subsidies are more likely to purchase than to rent and those working in the informal sector are more likely to purchase informal dwellings. Demand is quite responsive to price changes as well as to changes in the price of rental (its closest substitute). The elasticity to permanent income for both buying and renting is similar to that observed in other developing countries, and is higher for those working in the informal sector. This suggests that subsidies and other interventions aimed at fostering demand should not exclude those holding informal sector jobs. Demand is highly responsive to positive shocks to income, a fact probably associated with credit constraints being binding. Subsidies have a large positive impact on demand. Likewise, access to mortgage credit is an important determinant of demand. Finally, savings have a positive effect on demand in 2008, not in 2003. A plausible explanation is that a policy intervention that began in 2000 –i.e, a tax exemption for households that established savings accounts destined for housing purchases— only had an effect in the upper part of the business cycle. In both cases (i.e. subsidies and credit) the positive effect on demand is entirely explained by demand for social housing. "This paper is part of a cross-country project sponsored by the IADBs Research Network". |
| Date: | 2011–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:col:000123:009067&r=iue |
| By: | Bussolo, Maurizio; De Hoyos, Rafael E.; Medvedev, Denis |
| Abstract: | This paper uses a dynamic macro-micro framework to evaluate the potential distributional effects of the expansion of the Panama Canal. The results show that large macroeconomic effects are only likely during the operations phase (2014 and onward), and income gains are likely to be concentrated at the top of the income distribution. The additional foreign exchange inflows during the construction and operations phases result in the loss of competitiveness of non-Canal sectors (Dutch disease) and in higher domestic prices, which hurt the poorest consumers. In addition, the construction and operation activities increase demand for more educated non-farm formal workers. Although these changes encourage additional labor movement out of agriculture and from the informal to the formal sector, much of the impact is manifested in growing wage disparities and widening income inequality. Using the additional revenues of the Canal expansion in a targeted cash transfer program such as"Red de Oportunidades", the Government of Panama could offset the adverse distributional effects and eradicate extreme poverty. |
| Keywords: | Economic Theory&Research,Labor Policies,Markets and Market Access,Labor Markets,Emerging Markets |
| Date: | 2011–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5848&r=iue |