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on Informal and Underground Economics |
| By: | Ceyhun Elgin; Mario-Solis Garcia |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:bou:wpaper:2011/04&r=iue |
| By: | Basu, Arnab K. (College of William and Mary); Chau, Nancy (Cornell University); Siddique, Zahra (IZA) |
| Abstract: | We study the impact of tax and minimum wage reforms on the incidence of informality. To gauge the incidence of informality, we use measures of the extent of tax evasion, the extent of minimum wage non-compliance, and the size of the informal workforce. Our approach allows us to examine (i) the distinction between determinants of firm-level reported wage distribution and actual wage distribution, (ii) the complementarity of tax and minimum wage enforcement, (iii) the impact that a minimum wage reform has on tax and minimum wage compliance, and (iv) the impact that a tax policy reform has on tax and minimum wage compliance. We conclude with the design of optimal minimum wage and tax policies (even in the complete absence of minimum wage enforcement). We do so based on two objectives derived from popular concerns associated with an unchecked expansion of informality: tax revenue maximization, and poverty alleviation among workers. |
| Keywords: | tax evasion, minimum wage reform, flat tax reform, poverty, informality |
| JEL: | J3 J6 O17 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6228&r=iue |
| By: | Lehmann, Hartmut (University of Bologna); Razzolini, Tiziano (University of Siena); Zaiceva, Anzelika (University of Modena and Reggio Emilia) |
| Abstract: | In the years 2003-2008 the Russian economy experienced a period of strong and sustained growth, which was accompanied by large worker turnover and rising informality. We investigate whether the burden of informality falls disproportionately on job separators (displaced workers and quitters) in the Russian labor market in the form of informal employment and undeclared wages in formal jobs. We also pursue the issues whether displaced workers experience more involuntary informal employment than workers who quit and whether informal employment persists. We find a strong positive link between separations and informal employment as well as shares of undeclared wages in formal jobs. Our results also show that displacement entraps some of the workers in involuntary informal employment. Those who quit, in turn, experience voluntary informality for the most part, but there seems a minority of quitting workers who end up in involuntary informal jobs. This scenario does not fall on all separators but predominantly on those with low human capital. Finally, informal employment is indeed persistent since separating from an informal job considerably raises the probability to be informal in the subsequent job. |
| Keywords: | job separations, informality, Russia |
| JEL: | J64 J65 P50 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6230&r=iue |
| By: | Abdulloev, Ilhom (Rutgers University); Gang, Ira N. (Rutgers University); Landon-Lane, John (Rutgers University) |
| Abstract: | How is migration related to informal activities? They may be complementary since new migrants may have difficulty finding employment in formal work, so many of them end up informally employed. Alternatively, migration and informality may be substitutes since migrants' incomes in their new locations and income earned in the home informal economy (without migration) are an imperfect trade-off. Tajikistan possesses both a very large informal sector and extensive international emigration. Using the gap between household expenditure and income as an indicator of informal activity, we find negative significant correlations between informal activities and migration: the gap between expenditure and income falls in the presence of migration. Furthermore, Tajikistan's professional workers ability to engage in informal activities enables them to forgo migration, while low-skilled non-professionals without post-secondary education choose to migrate instead of working in the informal sector. Our empirical evidence suggests migration and informality substitute for one another. |
| Keywords: | informal, migration, remittances, Tajikistan |
| JEL: | O17 J61 P23 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6236&r=iue |
| By: | Elek, Peter (Eötvös Lorand University); Kollo, Janos (Hungarian Academy of Sciences); Reizer, Balázs (Central European University, Budapest); Szabó, Péter A. (Reformed Presbyterian Church of Central and Eastern Europe) |
| Abstract: | We estimate a double hurdle (DH) model of the Hungarian wage distribution assuming censoring at the minimum wage and wage under-reporting (i.e. compensation consisting of the minimum wage, subject to taxation, and an unreported cash supplement). We estimate the probability of under-reporting for minimum wage earners, simulate their genuine earnings and classify them and their employers as 'cheaters' and 'non-cheaters'. In the possession of the classification we check how cheaters and non-cheaters reacted to the introduction of a minimum social security contribution base, equal to 200 per cent of the minimum wage, in 2007. The findings suggest that cheaters were more likely to raise the wages of their minimum wage earners to 200 per cent of the minimum wage thereby reducing the risk of tax audit. Cheating firms also experienced faster average wage growth and slower output growth. The results suggest that the DH model is able to identify the loci of wage under-reporting with some precision. |
| Keywords: | tax evasion, double hurdle model, Hungary |
| JEL: | C34 H26 J38 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6224&r=iue |
| By: | Johanna D'Hernoncourt |
| Abstract: | This paper reports a negative relationship between the size of the shadow economy and generalized trust, in a sample of countries, both developed and developing. That relationship is robust to controlling for a large set of economic, policy, and institutional variables, to changing the estimate of the shadow economy and the estimation period, and to controlling for endogeneity. It is independent from trust in institutions and from income inequality, and is mainly present in the sample of developing countries. Those findings suggest that the tax compliance effect of trust dominates its role as a substitute for the formal legal system. |
| Keywords: | Shadow economy, informal sector, trust; Shadow economy, Informal sector, Trust |
| JEL: | O11 O17 O57 H26 Z13 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:ulb:ulbeco:2013/98287&r=iue |
| By: | Papps, Kerry L. (University of Bath) |
| Abstract: | Worker-level panel data are used to analyse the separate employment effects of increases in the social security taxes paid by employers and increases in the minimum wage in Turkey between 2002 and 2005. Variation over time and among low-wage workers in the ratio of total labour costs to the gross wage gives rise to a natural experiment. Regression estimates indicate that a given increase in social security taxes has a larger negative effect on the probability of a worker remaining employed in the next quarter than an equal-sized increase in the minimum wage. This result is incompatible with the textbook model of labour supply and demand and suggests that workers may increase effort in response to an increase in wages. Consistent with this explanation, it is found that groups with the least access to the informal sector experience the smallest disemployment effects of the minimum wage. |
| Keywords: | minimum wages, payroll taxes, employment, Turkey |
| JEL: | J32 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6214&r=iue |
| By: | Tansel, Aysit; Kan, Elif Oznur |
| Abstract: | Informality has long been a salient phenomenon in developing country labor markets, thus has been addressed in several theoretical and empirical research. Turkey, given its economic and demographic dynamics, provides rich evidence for a growing, heterogeneous and multifaceted informal labor market. However, the existing evidence on labor informality in Turkey is mixed and scant. Along these lines, we aim to extend the existing literature by providing a diagnosis of dynamic worker flows across distinct labor market states and identifying the effects of certain individual and job characteristics on variant mobility patterns. More specifically, we first develop and discuss a set of probability statistics based on annual worker transitions across distinct employment states utilizing Markov transition processes. As Bosch and Maloney (2007:3) argue: “labor status mobility can be assumed as a process in which changes in the states occur randomly through time, and probabilities of moves between particular states are governed by Markov transition matrices”. Towards this end, we will use the novel Income and Living Conditions Survey (SILC) panel data set to compute the transition probabilities of individuals moving across the labor market states of formal-salaried, informal-salaried, formal self-employed, informal self-employed, unemployed and inactive. The transitions analysis is conducted separately for two, three and four year panels pertaining to 2006 to 2007, 2006 to 2008 and 2006 to 2009 transitions; for total, male and female samples; and lastly for total and non-agricultural samples. In this way, we aim to contribute to the limited body of stylized facts available on mobility and informality in the Turkish labor market. Next, we conduct multinomial logit regressions individually for each set of panel to identify the impact of individual characteristics (i.e. gender, age, education level, work experience, sector of economic activity, firm size, number of other household members, having/not having children, rural/urban) underlying worker transitions. The results reveal several relationships between the covariates and likelihood of variant transitions, and are of remarkable importance for designing policy to adress labor informality and reduce its negative externalities. |
| Keywords: | Labor market dynamics; informality; Markov processes; multinomial logit; Turkey |
| JEL: | J63 J40 O17 J21 J24 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:35672&r=iue |
| By: | Aysit Tansel (Middle East Technical University, Institute for the Study of Labor (IZA), Germany and Economic Research Forum (ERF), Egypt); Elif Oznur Kan (Cankaya University) |
| Abstract: | Informality has long been a salient phenomenon in developing country labor markets, thus has been addressed in several theoretical and empirical research. Turkey, given its economic and demographic dynamics, provides rich evidence for a growing, heterogeneous and multifaceted informal labor market. However, the existing evidence on labor informality in Turkey is mixed and scant. Along these lines, we aim to extend the existing literature by providing a diagnosis of dynamic worker flows across distinct labor market states and identifying the effects of certain individual and job characteristics on variant mobility patterns. More specifically, we first develop and discuss a set of probability statistics based on annual worker transitions across distinct employment states utilizing Markov transition processes. As Bosch and Maloney (2007:3) argue: “labor status mobility can be assumed as a process in which changes in the states occur randomly through time, and probabilities of moves between particular states are governed by Markov transition matrices”. Towards this end, we will use the novel Income and Living Conditions Survey (SILC) panel data set to compute the transition probabilities of individuals moving across the labor market states of formal-salaried, informal-salaried, formal self-employed, informal self-employed, unemployed and inactive. The transitions analysis is conducted separately for two, three and four year panels pertaining to 2006 to 2007, 2006 to 2008 and 2006 to 2009 transitions; for total, male and female samples; and lastly for total and non-agricultural samples. In this way, we aim to contribute to the limited body of stylized facts available on mobility and informality in the Turkish labor market. Next, we conduct multinomial logit regressions individually for each set of panel to identify the impact of individual characteristics (i.e. gender, age, education level, work experience, sector of economic activity, firm size, number of other household members, having/not having children, rural/urban) underlying worker transitions. The results reveal several relationships between the covariates and likelihood of variant transitions, and are of remarkable importance for designing policy to address labor informality and reduce its negative externalities. |
| Keywords: | Labor market dynamics, informality, Markov processes, multinomial logit, Turkey |
| JEL: | J21 J24 J40 J63 O17 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:koc:wpaper:1201&r=iue |
| By: | Canagarajah, Sudharshan; Brownbridge, Martin; Paliu, Anca; Dumitru, Ionut |
| Abstract: | Romania, along with many other countries in the European Union, faces daunting fiscal challenges. Fiscal balances deteriorated sharply following the global economic crisis, forcing Romania to implement a fiscal consolidation that was one of the largest in the European Union, but which may not be sustainable without a recovery of economic growth. Although the ratio of public debt to gross domestic product is still relatively modest, at around 35 percent, long-term fiscal solvency is threatened by the costs of funding the public pension system in the face of adverse demographic shifts over the next 50 years. Because of widespread tax evasion, the tax system in Romania is one of the least efficient in the European Union. Tax reforms that can reduce the amount of tax lost to evasion and fraud could make a major contribution to enhancing fiscal sustainability. |
| Keywords: | Debt Markets,Public Sector Expenditure Policy,Emerging Markets,Public Sector Economics,Fiscal Adjustment |
| Date: | 2012–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5927&r=iue |
| By: | Akee, Randall K. Q. (Tufts University); Bedi, Arjun S. (ISS, Erasmus University Rotterdam); Basu, Arnab K. (College of William and Mary); Chau, Nancy (Cornell University) |
| Abstract: | We explore three hitherto poorly understood characteristics of the human trafficking market – the cross-border ease of mobility of traffickers, the relative bargaining strength of traffickers and final buyers, and the elasticity of buyers' demand. In a model of two-way bargaining, the exact configuration of these characteristics is shown to determine whether domestic and foreign crackdowns on illicit employment mutually reinforce or counteract one another in efforts to stem the tide of trafficking. Estimation results from a gravity model of trafficking present evidence consistent with the mutual reinforcement view, indicating considerable ease of mobility, partial bargaining power, and inelastic demand. |
| Keywords: | human trafficking, two-way Nash bargaining, victim protection, law enforcement |
| JEL: | K42 R23 O15 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6226&r=iue |
| By: | Hasan, Dr. Syed Akif; Subhani, Dr. Muhammad Imtiaz; Osman, Ms. Amber |
| Abstract: | Technology in terms of ‘information technology’ is a revolutionary discovery from time to time. On the similar note, one of the famous issues of IT is the Software Piracy, which has been the talk of the organizations every now and then. Software Piracy i.e. to avoid the illegal act of copying and stealing others information has always been a headache for organizations leading to billion dollars losses and no returns. This paper tracks the association of organizations’ ethical culture with its orientations and software piracy. It is understand the influence of ethical behavior of the organization on software piracy handling. The study revealed that there is a negative association between perceived organizational ethical culture and software piracy in organizations. In particular, organizational ethical culture significantly influences software piracy decisions for individual having ‘Exceptionist’ ethical orientation. Subsequently, there is no significant association between organizational ethical culture and software piracy for Subjectivists, Absolutists and Situationists. |
| Keywords: | Software Piracy; Software Licensing; Ethical Orientations; Organizational Culture |
| JEL: | D23 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:35683&r=iue |
| By: | Brusentsev, Vera; Newhouse, David; Vroman, Wayne |
| Abstract: | This paper contributes new evidence from two large household surveys on the compliance of firms with severance pay regulations in Indonesia, and the extent to which changes in severance pay regulations could affect employment rigidity. Compliance appears to be low, as only one-third of workers entitled to severance pay report receiving it, and on average workers only collect 40 percent of the payment due to them. Eligible female and low-wage workers are least likely to report receiving payments. Widespread non-compliance is consistent with trends in employment rigidity, which remained essentially unchanged following the large increases in severance mandated by the 2003 law. These results suggest that workers may benefit from a compromise that relaxes severance pay regulations while improving enforcement of severance pay statutes, and possibly establishing a system of unemployment benefits. |
| Keywords: | Labor Markets,Wages, Compensation&Benefits,Social Protections&Assistance,Labor Policies,Labor Management and Relations |
| Date: | 2012–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5933&r=iue |