nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2013‒04‒27
seven papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Women entrepreneurs in the informal economy: Is formalization the only solution for business sustainability? By Ramani, Shyama V.; Thutupalli, Ajay; Medovarski, Tamas; Chattopadhyay, Sutapa; Ravichandran, Veena
  2. Foreign wage premium, gender and education : insights from Vietnam household surveys By Fukase, Emiko
  3. Job Search Channels, Neighborhood Effects and Wages Inequality in Developing Countries: The Colombian Case By Garcia, Gustavo Adolfo; Nicodemo, Catia
  4. Tax evasion: Is this a government fight, or can anyone join? By Marcelo Arbex; Enlinson Mattos
  5. The importance of choosing the data set for tax-benefit analysis By Ceriani, Lidia; Fiorio, Carlo V.; Gigliarano, Chiara
  6. Undocumented Workers’ Employment across U.S. Business Cycles By David Brown; Serife Genc; Julie Hothckiss; Myriam Quispe-Agnoli
  7. Contrabando de cigarrillos y tributación en Colombia By Juan Gonzalo Zapata; Adriana Sabogal; Ana Cecilia Montes; Germán Rodríguez

  1. By: Ramani, Shyama V. (Brunel University, UNU-MERIT, and STI4Change); Thutupalli, Ajay (UNU-MERIT); Medovarski, Tamas (STI4Change); Chattopadhyay, Sutapa (UNU-MERIT); Ravichandran, Veena (IDRC)
    Abstract: The existing marketing, strategy and economics literature have little to offer by way of recommendations to promote entrepreneurship in the informal economy, except to advocate that multinationals, local firms, state and public agencies should work together to bring the informal economy into the fold of the formal economy. In contrast, this paper argues that the business sustainability of women entrepreneurs in the informal economy depends upon their engagements or business partnerships with other women (and men) and women-focussed intermediaries. More than formalization, women entrepreneurs need 'spaces' for dialogue with other women (and men) to learn and build business capabilities. Both the State and firms wanting to penetrate the informal economy can create such spaces through partnerships with NGOs and women-focussed organizations. While formalization of entrepreneurial activity is favourable under some circumstances, it can be detrimental under others - necessitating a case by case evaluation rather than a general rule. In order to ensure the business sustainability of women's ventures in the informal economy, any sort of formalization must occur through a gradual process accompanied by intermediaries. These results are formulated through the compilation and analysis of the existing literature and the study of six detailed case studies of women entrepreneurs from developing countries validated by extensive interviews. The results are then used to propose a closed model of linkages between formal and informal economies which has novel organizational implications for firms competing to establish consumer bases and business partnerships in the Base of Pyramid (BoP) markets of developing countries.
    Keywords: Informal economy, entrepreneurship, gender, business sustainability
    JEL: L26 B54 E26
    Date: 2013
  2. By: Fukase, Emiko
    Abstract: This paper investigates the differential impacts of foreign ownership on wages for different types of workers (in terms of educational background and gender) in Vietnam using the Vietnam Household Living Standards Surveys of 2002 and 2004. Whereas most previous studies have compared wage levels between foreign and domestic sectors using firm-level data (thus excluding the informal sector), one advantage of using the Living Standards Surveys in this paper is that the data allow wage comparison analyses to extend to the informal wage sector. A series of Mincerian earnings equations and worker-specific fixed effects models are estimated. Several findings emerge. First, foreign firms pay higher wages relative to their domestic counterparts after controlling for workers’ personal characteristics. Second, the higher the individual workers'levels of education, the larger on average are the wage premiums for those who work for foreign firms. Third, longer hours of work in foreign firm jobs relative to working in the informal wage sector are an important component of the wage premium. Finally, unskilled women experience a larger foreign wage premium than unskilled men, reflecting the low earning opportunities for women and a higher gender gap in the informal wage sector.
    Keywords: Labor Markets,Labor Policies,Economic Theory&Research,Gender and Development,Bankruptcy and Resolution of Financial Distress
    Date: 2013–04–01
  3. By: Garcia, Gustavo Adolfo (Autonomous University of Barcelona); Nicodemo, Catia (University of Oxford)
    Abstract: This paper analyses the relationship between social networks and the job search behaviour of individuals. Networking is not only based on friends and relatives but also on neighbourhood. The geographic closeness is associated to social interactions. Individuals who are in physical and social proximity share the same sources of information, because they divide individual characteristics or because they learn from one another's behaviour. Using data from Colombia in 2009 we explore how neighbourhoods have an effect on the channel used to search for a job (formal vs informal). People tend to opt for a formal or informal channel depending on the channel selected by employed people in their neighbourhood. In addition, we study the wage premium in using a formal or informal channel, exploring the inequality that can arise using a different job search method. Our results show that the neighbourhood affects the individual's job search method and referral workers earn less wage at the bottom of the wage distribution with respect to non-referred workers. At the top of the wage distribution the difference observed is due to different characteristics between the two groups. Colombia presents persistent high levels of informality and inequality. These features impose important social and economic costs such as low tax collection, low employee protection and deficiencies in the labour intermediation process with strong informational asymmetries in the job search. New policies to regulate the labour market are need.
    Keywords: neighborhood effects, formal and informal networks, job search, quantile regression
    JEL: J64 J31 J24 P23 J6 J7 J0
    Date: 2013–04
  4. By: Marcelo Arbex (Department of Economics, University of Windsor); Enlinson Mattos (São Paulo School of Economics, Getulio Vargas Foundation)
    Abstract: In the traditional optimal taxation literature, taxpayers and consumers are viewed and treated as potential tax evaders. We consider an optimal commodity taxation model where consumers have an important role as tax enforcers. Requesting purchase receipts (individual auditing) is time consuming and the government offers a fraction of the taxes collected to provide incentive for buyers to participate in the auditing activity. We show that tax rebates have a non-trivial income effect, which modifies the traditional (dual approach) "Ramsey equation". Tax-enforcement policies affect buyers' allocations directly, in addition to standard changes in the good's price. Comparing numerical results across three tax-enforcement regimes, we observe that welfare is higher if individual auditing is the only tax enforcement policy.
    Keywords: Optimal Taxation, Indirect Tax Evasion, Tax Enforcement and Auditing.
    JEL: E62 H21 H26 K42
    Date: 2013–04
  5. By: Ceriani, Lidia; Fiorio, Carlo V.; Gigliarano, Chiara
    Abstract: Given the increased availability of survey income data, in this paper we analyse the pros and cons of alternative data sets for static tax-benefit microsimulation in Italy. We focus on all possible alternatives, namely using (a) SHIW or (b) IT-SILC data using a consistent net-to-gross microsimulation model, or IT-SILC data using the gross incomes provided since 2007. Our results suggest that IT-SILC improves in the regional representativeness of the Italian population and does not perform worse than SHIW as for most demographic characteristics, SHIW provides more information regarding building and real estate incomes. Gross income variables simulated by using the net-to-gross module included in the TABEITA microsimulation model and calibrating for tax evasion provide a very precise fit with external statistics, improving on results which could be obtained using the same TABEITA model on SHIW data. Simulated IT-SILC gross income data fit external aggregate data even better than gross income data provided in IT-SILC, which tend to largely overestimate self-employment income. Finally, we suggest to match IT-SILC with SHIW to include in the former the information on building and real estate incomes that are contained
    Date: 2013–03–28
  6. By: David Brown; Serife Genc; Julie Hothckiss; Myriam Quispe-Agnoli
    Abstract: Using matched employer-employee data from the state of Georgia, this paper investigates how employment of undocumented workers varies along the business cycle and how it differs from the adjustment in employment of documented workers. The cyclical component of undocumented employment is found to be significantly more volatile than the cyclical component of documented employment. Simulation results indicate that complementarities between documented workers and capital account for almost 90 percent of the difference in measured volatility between documented and undocumented employment.
    Keywords: business cycles, illegal immigration, undocumented workers
    JEL: J J61
    Date: 2013
  7. By: Juan Gonzalo Zapata; Adriana Sabogal; Ana Cecilia Montes; Germán Rodríguez
    Abstract: En los últimos años se evidencia un aumento importante del contrabando de cigarrillos. Con base en la información de Protabaco-BAT, se estimó que entre enero de 2008 y abril de 2012, el contrabando de cigarrillos aumentó en cerca de 800%, al pasar del 0,8% de la participación del mercado en enero de 2008 al 8,5% en abril de 2012. La dinámica del contrabando de cigarrillos desde el 2010 en adelante es coincidente con el aumento de la carga tributaria en el mismo período por efecto del Decreto 127 y la Ley 1393, ambos de 2010. Sin embargo en Colombia la carga tributaria viene aumentando desde 1995. La Ley 1393 de 2010, aumentó la tarifa del impuesto al consumo y creó una sobretasa del 10% de la base gravable que se destina exclusivamente al financiamiento de la salud.
    Date: 2012–11–29

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