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on Informal and Underground Economics |
| By: | Ceyhun Elgin; Oguz Oztunali |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:bou:wpaper:2012/05&r=iue |
| By: | Pickhardt, Michael; Sardà, Jordi |
| Abstract: | We further refine the Modified-Cash-Deposits-Ratio (MCDR) approach, developed by Pickhardt and Sardà (2011, 2012) with a view to analyze size and causes of the cash using section of the underground economy. Among other things, we address the issue of cash hoarding. Findings include that the size of hoarded currency in Germany, about 40 to 110 billion Euro in 2009 according to recent estimates, may have reduced the size of the cash using underground economy in Germany, ceteris paribus, from about 8.5 to 2 percent in 2009, according to the MCDR approach. -- |
| Keywords: | underground economy,shadow economy,hoarding,cash demand |
| JEL: | O17 H26 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cawmdp:56&r=iue |
| By: | Marcello M. Estevão; Irineu E. Carvalho Filho |
| Abstract: | Even though institutions are created to protect workers, they may interfere with labor market functioning, raise unemployment, and end up being circumvented by informal contracts. This paper uses Brazilian microeconomic data to show that the institutional changes introduced by the 1988 Constitution lowered the sensitivity of real wages to changes in labor market slack and could have contributed to the ensuing higher rates of unemployment in the country. Moreover, the paper shows that states that faced higher increases in informality (i.e., illegal work contracts) following the introduction of the new Constitution tended to have smaller drops in wage responsiveness to macroeconomic conditions, thus suggesting that informality serves as a escape valve to an over-regulated environment. |
| Keywords: | Brazil , Economic models , Labor markets , Unemployment , Wages , |
| Date: | 2012–03–21 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:12/84&r=iue |
| By: | Rana Hasan; Karl Robert L. Jandoc |
| Abstract: | We use data from Indian manufacturing to describe the distribution of firm size in terms of employment and discuss implications for public policy, especially labor regulations. A unique feature of our analysis is the use of nationally representative establishment-level data from both the registered (formal) and unregistered (informal) segments of the Indian manufacturing sector. While we find there to be little difference in the size distribution of firms across states believed to have flexible labor regulations versus those with inflexible labor regulations, restricting attention to labor-intensive industries changes the picture dramatically. Here, we find greater prevalence of larger sized firms in states with flexible labor regulations. Moreover, this differential prevalence is higher among firms that commenced production after 1982, when a key aspect of Indian labor regulations was tightened. Overall, our findings are consistent with the argument that labor regulations have affected firm size adversely. |
| Keywords: | India, Labor regulations, Firm size distribution, manufacturing, employment, public policy |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecq:wpaper:1118&r=iue |
| By: | de Mel, Suresh (University of Peradeniya); McKenzie, David (World Bank); Woodruff, Christopher (University of Warwick) |
| Abstract: | The majority of firms in most developing countries are informal. We conducted a field experiment in Sri Lanka which provided incentives for informal firms to formalize. Offering only information about the registration process and reimbursement for direct registration costs had no impact on formalization. Adding payments equivalent to one-half to one month's profits for the median firm leads to registration of around one-fifth of firms. A larger payment equivalent to two month's median profits induces half of the firms to register. Among the firms not registering after being offered this larger incentive, many faced issues related to ownership of land. Three follow-up surveys at 15 to 31 months after the intervention measure the impact formalizing has on these firms. Although mean profits increase, this appears largely due to the experiences of a few firms which grew rapidly, with most firms experiencing no increase in income as a result of formalizing. We also find little evidence for most of the channels through which formalization is hypothesized to benefit firms, although formalized firms do advertise more. Finally, formalizing is found to result in a large increase in trust in the state. |
| Keywords: | informality, small enterprises, entrepreneurship |
| JEL: | O17 O12 C93 D21 L26 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6442&r=iue |
| By: | Asha Sundaram; Reshad Ahsan; Devashish Mitra |
| Abstract: | In this paper, we have investigated the relationship between the formal and informal manufacturing sectors in India. We find that the employment, output and the value added of the informal part of each of the manufacturing industries in the various Indian states are strongly positively correlated with the same variables for the formal part of the respective industry in these states. Our results provide support for complementarities between formal and informal manufacturing arising possibly from both agglomeration and outsourcing. We also find fairly strong support for the role of labor market flexibility in enabling this complementarity. Trade liberalization also turns out to have an important role. |
| Keywords: | India, Formal Manufacturing, Informal Manufacturing, Policies, Institutions, employment, output, agglomeration, outsourcing, value added |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecq:wpaper:1116&r=iue |
| By: | Andrew Ellul; Tullio Jappelli (Università di Napoli Federico II, CSEF, CEPR and ECGI); Marco Pagano (Università di Napoli Federico II CSEF, EEIF, CEPR and ECGI); Fausto Panunzi (Università Bocconi, CEPR and ECGI) |
| Abstract: | In choosing transparency, firms must trade off the benefits from better access to finance against the cost of a greater tax burden. We study this trade-off in a model with distortionary taxes and endogenous rationing of external finance. The evidence from two different data sets, one formed only by listed firms and another mainly by unlisted firms, bears out the model’s predictions: First, investment and access to finance are positively correlated with accounting transparency, especially in firms that depend more on external finance, and are negatively correlated with tax pressure. Second, transparency is negatively correlated with tax pressure, particularly in sectors where firms are less dependent on external finance, and is positively correlated with tax enforcement. Finally, financial development enhances the positive effect of transparency on investment, and encourages transparency by financially dependent firms. JEL Classification: G31, G32, G38, H25, H26, M40. |
| Keywords: | transparency, tax pressure, investment, access to finance. |
| Date: | 2012–04–11 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:310&r=iue |
| By: | Ellul, Andrew; Jappelli, Tullio; Pagano, Marco; Panunzi, Fausto |
| Abstract: | In choosing transparency, firms must trade off the benefits from better access to finance against the cost of a greater tax burden. We study this trade-off in a model with distortionary taxes and endogenous rationing of external finance. The evidence from two different data sets, one formed only by listed firms and another mainly by unlisted firms, bears out the model’s predictions: First, investment and access to finance are positively correlated with accounting transparency, especially in firms that depend more on external finance, and are negatively correlated with tax pressure. Second, transparency is negatively correlated with tax pressure, particularly in sectors where firms are less dependent on external finance, and is positively correlated with tax enforcement. Finally, financial development enhances the positive effect of transparency on investment, and encourages transparency by financially dependent firms. |
| Keywords: | access to finance; tax pressure; Transparency |
| JEL: | G31 G32 G38 H25 H26 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8939&r=iue |
| By: | José María Durán-Cabré (Universitat de Barcelona & IEB); Alejandro Esteller-Moré (Universitat de Barcelona & IEB); Luca Salvadori (Universitat de Barcelona & IEB) |
| Abstract: | Tax auditing parameters have been largely overlooked by the literature as policy-making instruments of any relevance; however, enforcement strategies are critical elements of the tax burden. In this paper we show that, in a federal framework, tax auditing policies can serve as additional tools for regional interaction. We examine the presence of this interaction by adopting a spatial econometric approach. We employ a time-space recursive model that accounts for sluggish adjustment in auditing policies and obtain results that are congruent with standard theory, corroborating the presence of horizontal competition between regions in their tax auditing policies. We also find that once regional governments acquire legal power, the opaque competition in enforcement policies disappears apparently switching to a more transparent competition in statutory tax parameters. |
| Keywords: | Tax administration and auditing, fiscal competition, fiscal federalism |
| JEL: | H71 H77 H83 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2012/3/doc2012-5&r=iue |
| By: | Ejaz Ghani; Arti Grover Goswami; William R. Kerr |
| Abstract: | This paper investigates the urbanization of the Indian manufacturing sector by combining enterprise data from formal and informal sectors. We find that plants in the formal sector are moving away from urban and into rural locations, while the informal sector is moving from rural to urban locations. While the secular trend for India’s manufacturing urbanization has slowed down, the localized importance of education and infrastructure have not. Our results suggest that districts with better education and infrastructure have experienced a faster pace of urbanization, although higher urban-rural cost ratios cause movement out of urban areas. This process is associated with improvements in the spatial allocation of plants across urban and rural locations. Spatial location of plants has implications for policy on investments in education, infrastructure, and the livability of cities. The high share of urbanization occurring in the informal sector suggests that urbanization policies that contain inclusionary approaches may be more successful in promoting local development and managing its strains than those focused only on the formal sector. |
| JEL: | J61 L10 L60 O10 O14 O17 R11 R12 R13 R14 R23 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17992&r=iue |