|
on Informal and Underground Economics |
| By: | Donici, Gabriel-Andrei/GA |
| Abstract: | A real, almost palpable, connection exists between the official and the underground economy. More than that, both sides of the economy (official and underground) are connected with the competitiveness of a country. Strangely a large presence of undereground in the economy is a sign of competitiveness. Although we would be tempted to say that underground is bad for competitiveness the reality is that due to taxes and regulations the resources (especially the human ones) used ”illegaly” would probably be wasted. In the end the wages from the underground economy return to the oficial one suporting it and hence the competitiveness of the country. |
| Keywords: | official economy; underground economy; illegal activities; tax evasion; economic competitiveness |
| JEL: | E26 H26 |
| Date: | 2012–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:36025&r=iue |
| By: | Gonzalo Castex; Miguel Ricaurte |
| Abstract: | In a general equilibrium context, we analyze the impact of changes in institutional labor market conditions, such as access to financing and efficiency, on the composition of employment and unemployment, considering the nature of formal labor contracts and the entrepreneurial capacity of the labor force. We extend the Mortensen - Pissarides model to allow for two types of formal job contracts: temporary and permanent; and we also allow for self-employment. We show that labor market efficiency as well as access to selfemployment financing played a key role in the evolution of employment in Chile during the last 15 years. Additionally, and not surprisingly, tougher access to financing adversely affects self-employment |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:chb:bcchwp:650&r=iue |
| By: | Aysit Tansel (Middle East Technical University); 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 adress 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 |
| URL: | http://d.repec.org/n?u=RePEc:tek:wpaper:2012/1&r=iue |
| By: | Tansel, Aysit (Middle East Technical University); Kan, Elif Oznur (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:iza:izadps:dp6271&r=iue |
| By: | Doerrenberg, Philipp (University of Cologne); Duncan, Denvil (Indiana University); Fuest, Clemens (University of Oxford); Peichl, Andreas (IZA) |
| Abstract: | This paper is the first to provide evidence of efficient taxation of groups with heterogeneous levels of 'tax morale'. We set up an optimal income tax model where high tax morale implies a high subjective cost of evading taxes. The model predicts that 'nice guys finish last': groups with higher tax morale will be taxed more heavily, simply because taxing them is less costly. Based on unique cross-country micro data and an IV approach to rule out reverse causality, we find empirical support for this hypothesis. Income groups with high tax morale systematically face higher average and marginal tax rates. |
| Keywords: | tax morale, tax compliance, optimal taxation, political economy |
| JEL: | H2 H3 D7 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6275&r=iue |
| By: | Kai A. Konrad; Tim Lohse; Salmai Qari |
| Abstract: | This paper studies the role of beliefs about own performance or appearance for compliance at the customs. In an experiment in which underreporting has a higher expected payoff than truthful reporting we find: a large share, about 15-20 percent of the subjects, is more compliant if they have reason to imagine that their performance influences their subjective audit probability. In contrast, we do not find evidence for individuals who believe that by their personal performance they can reduce the subjective probability for an audit. Our results suggest that the power of imagination, i.e. the role of second-order beliefs in the process of customs declarations is important and may potentially be used to improve customs and tax compliance. |
| Keywords: | Customs, tax compliance, audit probability, second-order beliefs |
| JEL: | H26 H31 C91 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:mpi:wpaper:customs_compliance_and_the_power_of_imagination&r=iue |
| By: | Lohse, Tim; Lutz, Peter F.; Qari, Salmai |
| Abstract: | This paper studies the role of beliefs about own performance or appearance for compliance at the customs. In an experiment in which underreporting has a higher expected payoff than truthful reporting we find: a large share, about 15-20 percent of the subjects, is more compliant if they have reason to imagine that their performance influences their subjective audit probability. In contrast, we do not find evidence for individuals who believe that by their personal performance they can reduce the subjective probability for an audit. Our results suggest that the power of imagination, i.e. the role of second-order beliefs in the process of customs declarations is important and may potentially be used to improve customs and tax compliance. -- |
| Keywords: | Customs,tax compliance,audit probability,second-order beliefs |
| JEL: | H26 H31 C91 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wzbfff:spii2011108&r=iue |
| By: | Gagnon, Jason (OECD); Xenogiani, Theodora (OECD); Xing, Chunbing (Beijing Normal University) |
| Abstract: | The rapid and massive increase of rural-to-urban migration in China has drawn attention to the welfare of migrant workers, particularly to their working conditions and pay. This paper uses data from a random draw of the 2005 Chinese national census survey to investigate discrimination in urban labour markets against rural migrants, by comparing their earnings and the sector (formal vs. informal) they work in with those of urban residents and urban migrants. Exploiting differences in their status in the Chinese residential registration system (hukou) we find no earnings discrimination against rural migrants compared with urban residents, contrary to popular belief. In contrast, we find that urban migrants in fact gain a large wage premium by migrating. However, both rural and urban migrants are found to be discriminated out of the formal sector, working in informal jobs and lacking adequate social protection. |
| Keywords: | migration, China, discrimination, informal employment |
| JEL: | O15 R23 J24 J71 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6268&r=iue |
| By: | Stampini, Marco (Inter-American Development Bank); Leung, Ron (African Development Bank); Diarra, Setou M. (Université Laval); Pla, Lauréline (African Development Bank) |
| Abstract: | In recent years, the private sector has been recognized as a key engine of Africa's economic development. Yet, the most simple and fundamental question remains unanswered: how large is the African private sector? We present novel estimates of the size of the private sector in 50 African countries derived from the analysis of national accounts and labor market data. Our results point to a relatively large size of the African private sector. National account data shows that this accounts for about 2/3 of total investments, 4/5 of total consumption and 3/4 of total credit. In relative terms, large private sector countries are concentrated in Western Africa (Cote d'Ivoire, Guinea, Niger, Senegal and Togo), Central Africa (Cameroun, Republic of Congo) and Eastern Africa (Kenya, Sudan, Uganda and Tanzania), with the addition of Mauritius. Countries with small private sectors include a sample of oil-exporters (Algeria, Angola, Equatorial Guinea, Libya and Nigeria), some of the poorest countries in the continent (Burundi, Burkina Faso, Guinea Bissau, Mali and Sao Tome e Principe), Zambia and Botswana. Over the last ten years, the size of the private sector has been contracting significantly in oil exporting countries, although the variation in its size does not appear to be significantly correlated with growth performance. Labor market data reinforces the idea of a large private sector, which provides about 90% of total employment opportunities. However, most of this labor is informal and characterized by low productivity: permanent wage jobs in the private sector account on average for only 10% of total employment (a share similar to that provided by public administration and state owned enterprises). South Africa is the notable exception, with formal wage employment in the private sector representing 46% of total employment. Finally, we find evidence of negative private sector earning premiums, suggesting that market distortions abound. These are likely to prevent the efficient allocation of human resources, and to reduce the overall productivity of the African economies. |
| Keywords: | private sector size, private sector development, private consumption, private investment, national accounts, private sector employment, private sector earnings, labor markets, Africa |
| JEL: | H10 J21 O10 O55 P17 Y10 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6267&r=iue |
| By: | Morley, Samuel; Piñeiro, Valeria |
| Abstract: | In this paper we develop a dynamic regional computable general equilibrium (CGE) model for Guatemala that incorporates regional disaggregated sectors for agriculture. The model is designed to be useful as a development tool for determining the effects of regional investments intended to reduce regional poverty and also to explore policy options to deal with a number of macro and balance-of-payments issues. Our model extends previous modeling work on Guatemala in several ways. First, it develops an updated regional social accounting matrix (SAM) for 2008, coupled with an updated CGE. Second, the CGE is a recursive dynamic model that incorporates unemployment in the short run. Most CGE models are not useful for short-run analysis because they are comparative static models that assume full employment. We specify a fixed minimum wage and an informal sector and use a recursive dynamic framework to solve for the short-run adjustment process that occurs as the economy responds to shocks. Second, the model is regional, permitting us to examine the impact of sectoral development policies, particularly those focused on agriculture. Guatemala has one of the lowest investment rates in Latin America. We show that if the investment share is raised by 4percent over five years, the rate of growth of the economy rises by about .6 percentage points. Guatemala is also quite sensitive to external macro disturbances. Our dynamic model gives a first approximation of the timing and nature of the adjustment over the ten years following various macro disturbances. We show that after ten years most of these shocks are absorbed by changes in the real exchange rate and the composition of output rather than the rate of growth of output. Negative shocks cause a real devaluation and a shift from consumption and non-tradables and towards exports and tradable goods. An important empirical question is whether the adjustment toward the traded goods sector is as flexible as the underlying elasticities in the model imply. |
| Keywords: | Computable general equilibrium (CGE) modeling, Economic development, general equilibrium models, macro shocks, regional CGE model, |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1137&r=iue |