nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2013‒01‒07
eleven papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. (Tax evasion) power to the people: does "early democratization" increase the size of the informal sector? By Adam, Antonis; Kammas, Pantelis
  2. How Different Are the Wage Curves for Formal and Informal Workers? Evidence from Turkey By Badi H. Baltagi; Yusuf Soner Baskaya; Timur Hulagu
  3. Formal and informal institutions:towards a deeper understanding of a complex relationship. Some cases in the labour market By Sebastiano Fadda
  4. Urbanization and access to labour market in Vietnam: Weight and characteristics of the informal sector. By Roubaud, François; Razafindrakoto, Mireille; Nguyễn, Hữu Chí; Cling, Jean-Pierre
  5. How do institutions influence the own-account worker's decision to hire employees? By André van Stel; José Maria Millán; Concepcion Roman; Ana Millán
  6. Solving the Yitzhaki Paradox By Gwenola Trotin
  7. Exploring Tax Evasion in the Context of Political Uncertainty By Barbara G. Katz; Joel Owen
  8. Enrolling the Self-Employed in Mandatory Health Insurance in Colombia: are we missing other factors? By Alejandro Arrieta; Ariadna García Prado; Giota Panopoulou
  9. The Economic Costs of Organized Crime: Evidence from Southern Italy By Paolo Pinotti
  10. Per un’Interpretazione del Dualismo Italiano: Complementarità Istituzionale o Isteresi Congiunturale? By Nicolò Bellanca
  11. Mercado de trabajo, vulnerabilidad social y movilización política en Buenos Aires (1988-2008) By Cecilia Cross

  1. By: Adam, Antonis; Kammas, Pantelis
    Abstract: This paper examines the political economy forces that lead to the creation of the informal sector in an economy. Our analysis treats unofficial economy as an endogenous outcome that may be produced by the conflict for redistribution between different groups of agents. The crucial factor in our analysis is whether the extension of voting franchise takes place before the consolidation of a strong state characterized by solid institutions (this is what we call "early democratization"). When this happens, distributional conflict affects the quality of institutions since the political elites have an incentive to decide weaker institutions which allows them to mitigate the tax burden fallen on their income. In the empirical section, we examine whether countries that experienced “early democratization” are characterized by relatively larger informal sectors. Our findings provide strong empirical evidence in favor of the implication driven by our theoretical model.
    Keywords: Redistribution; Inequality; Tax Evasion
    JEL: H10 H23 H26
    Date: 2012–12–20
  2. By: Badi H. Baltagi (Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244-1020); Yusuf Soner Baskaya (Türkiye Cumhuriyet Merkez Bankası); Timur Hulagu (Central Bank of Turkey)
    Abstract: This paper presents wage curves for formal and informal workers using a rich individual level data for Turkey over the period 2005-2009. The wage curve is an empirical regularity describing a negative relationship between regional unemployment rates and individuals' real wages. While this relationship has been well documented for a number of countries including Turkey, less attention has focused on how this relationship differs for informal versus formal employment. This is of utmost importance for less developed countries where informal employment plays a significant role in the economy. Using the Turkish Household Labor Force Survey for the period 2005-2009 observed over 26 NUTS-2 regions, we find that real hourly wages of informal workers in Turkey are more sensitive to variations in regional unemployment rates than wages of formal workers. This is true for all workers as well as for different gender and age groups Key Words: Formal/Informal Employment; Wage Curve; Regional Labor Markets JEL No. C26, J30, J60, O17
    Date: 2012–10
  3. By: Sebastiano Fadda (dpt. Economia)
    Abstract: 1. Redefining Institutions 2. Formal and informal institutions 3. The evolution of economic institutions and the interplay between “formal” and “informal” ones 4. Some cases in the labour market
    Keywords: formal and informal institutions, labour market, economic institutions
    JEL: B52 J01
    Date: 2012–03
  4. By: Roubaud, François; Razafindrakoto, Mireille; Nguyễn, Hữu Chí; Cling, Jean-Pierre
    Keywords: Économie souterraine; Marché du travail; Main-d'oeuvre; Périurbanisation; Croissance urbaine;
    JEL: O53 O18 O17 J40 J21
    Date: 2012
  5. By: André van Stel; José Maria Millán; Concepcion Roman; Ana Millán
    Abstract: This paper examines the impact of the institutional environment on the individual decision of ownaccount workers to hire employees. In particular, we investigate whether variations in degree of employment protection, expenditure on employment incentives and taxation frameworks influence this decision. In conducting this analysis, discrete choice models are applied to individual level data drawn from the European Community Household Panel for the EU-15 countries. The institutional macro proxies we include are developed by OECD. Our results show that the strictness of employment protection legislation is negatively related to the probability that own-account workers hire employees and hence, become employers. We also find that the decision to hire employees is positively related to the expenditure on employment incentives and negatively related to corporate income tax rates. This new evidence may be useful for governments aiming to create a more enabling macro-environment for employment growth.
    Date: 2012–12–18
  6. By: Gwenola Trotin (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)
    Abstract: This paper examines the determinants of tax evasion under prospect theory. For prospect theory, reference dependence is a fundamental element (the utility function depends on gains and losses relative to a reference point and not on final wealths as in expected utility theory). In order to identify the determinants of the income tax evasion decision, a general reference income is used. We show that results obtained under expected utility theory are not robust. In particular, tax evasion is increasing in the tax rate as soon as a suitable relative risk aversion measure is larger with auditing, than without. With this simple and testable condition, prospect theory provides a general framework consistent with empirical evidence for the tax evasion behaviour problem.
    Keywords: Tax evasion; Prospect theory; Reference dependence; Decision weights.
    JEL: D81 H26 K42
    Date: 2012–09–03
  7. By: Barbara G. Katz; Joel Owen
    Date: 2012
  8. By: Alejandro Arrieta; Ariadna García Prado (Departamento de Economía-UPNA); Giota Panopoulou
    Abstract: We assess the impact that Colombia’s 1993 health sector reform had on the enrollment of self-employed workers in mandatory social health insurance scheme, with a especial focus on the independent contractors. This group grew dramatically in the form of workers cooperatives between 1993 and 2003, becoming a source of self-employed evasion and a way to disguised employment. We use two national-level Living Standards Measurement Surveys conducted in Colombia in 1997 and 2003, and follow a methodology that corrects for sample selection, decomposing health insurance coverage variation into changes attributed to the reform and to the characteristics of independent contractors. We find that: (i) Between 1997 and 2003, enrollment increased in 28 percentage points reaching an insurance rate of 62%, still below the reform goal of 80%, (ii) enrollment of independent contractors in 1997 was only 35% (compared to 50%) after adjusting by the selection bias due to disguised employment, (ii) the new legislation and stringent monitoring implemented in 2003 to cope with evasion seem to be effective since the sample selection due to disguised employment was not statistically significant in 2003. Addressing the interaction of the labor market with the health reform, as well as, accounting for the heterogeneity within the self-employed group are the main contributions of this paper to the literature on health insurance reforms in developing countries.
    Keywords: Self-employed, worker cooperatives, health insurance, Colombia.
    JEL: D24 I12 I18
    Date: 2012
  9. By: Paolo Pinotti
    Abstract: I examine the post-war economic development of two regions in southern Italy exposed to maa activity after the 1970s and apply synthetic control methods to estimate their counterfactual economic performance in the absence of organized crime. The synthetic control is a weighted average of other regions less aected by maa activity that mimics the economic structure and outcomes of the regions of interest several years before the advent of organized crime. The comparison of actual and counterfactual development shows that the presence of maa lowers GDP per capita by 16%, at the same time as murders increase sharply relative to the synthetic control. Evidence from electricity consumption and growth accounting suggests that lower GDP re ects a net loss of economic activity, due to the substitution of private capital with less productive public investment, rather than a mere reallocation from the ocial to the unocial sector.
    Keywords: organized crime, economic development, synthetic control methods
    Date: 2012–09
  10. By: Nicolò Bellanca (Dipartimento Scienze Economiche, Università degli studi di Firenze)
    Abstract: In questa nota si discutono le recenti ricerche quantitative sulla storia economica italiana post-unitaria. Si valutano, sulla base di tali ricerche, alcuni recenti contributi alla letteratura sul dualismo tra Nord e Sud d’Italia. Infine si propongono due schemi teorici, basati su categorie neo-istituzionaliste, che aiutino a spiegare la genesi e l’evoluzione del dualismo.
    Keywords: Economic dualism; Italy; New institutional economics.
    JEL: B52 O17 Z13
    Date: 2012
  11. By: Cecilia Cross
    Abstract: Este trabajo es resultado de una investigación sobre procesos de implementación de políticas sociales dirigidas a desocupados/as en Buenos Aires en el período 1998-2008. La hipótesis que estructura este trabajo es que en estos años se estructuró un campo de fuerzas en torno al trabajo, en el contexto del cual los/as marginados/as de los mercados de trabajo primarios o formales tuvieron grados variables de fuerza para imponer su caracterización acerca de la situación que estaban padeciendo. Cuando lograron instalar al desempleo como problema social que exige respuestas políticas su situación relativa mejoró, cuando su situación fue planteada en términos de inempleabilidad –y se instrumentaron programas en consecuencia- su participación en el ingreso se vio deteriorada. En tal sentido, sostenemos que la definición de su situación no está vinculada con sus atributos personales sino con la relación de fuerzas establecida en el campo político.
    Date: 2012–12–16

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