nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2013‒06‒30
eight papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. A new estimation of the size of informal economy using monetary and full expenditures in a complete demand system. By Armagan Tuna Aktuna Gunes; Christophe Starzec; François Gardes
  2. Local governance and the informal economy : experiences in promoting decent work in the Philippines By Indon, Reginald M; Yu, Sandra O
  3. The "emersion" effect: an ex post and ex ante social program evaluation on labor tax evasion in Italy By Edoardo Di Porto; Leandro Elia; Cristina Tealdi
  4. Is Formal Employment Discouraged by the Provision of Free. Health Services to the Uninsured ? Evidence From a Natural Experiment in Mexico By Alejandro Del Valle
  6. Essays on banking and finance in China. By Lu, L.
  7. Empirical Characteristics of Legal and Illegal Immigrants in the U.S. By Vincenzo Caponi
  8. Maritime piracy – the challenge of providing long-term solutions By Stephanie Jones

  1. By: Armagan Tuna Aktuna Gunes (Centre d'Economie de la Sorbonne - Paris School of Economics); Christophe Starzec (Centre d'Economie de la Sorbonne - Paris School of Economics); François Gardes (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: We use the demand system approach to estimate the size of informal economy in Turkey following the methodology based on the analysis of the individual consumption behaviour proposed by Pissarides, Weber (1989), Lyssiotou et al. (2004), and Fortin et al. (2009). We extend this method by taking into account both the monetary expenditures and time spent on domestic activities. The necessary information of money and time inputs in consumption on the household's level is obtained by statistical match of Turkish Family Budget and Time Use surveys (2006). As expected, the estimated model size of the informal economy in Turkey using the full (time plus money) expenditure is higher than those obtained by only monetary approach (in average 40.6% and 33.5% of GDP respectively) and also higher than obtained by more conventional macroeconomic methods (for example 35.1% by Schneider in 2005 with DYMIMIC model).
    Keywords: Informal economy, complete demand system, time use full expenditures.
    JEL: D01 D12 E26 C81
    Date: 2013–06
  2. By: Indon, Reginald M; Yu, Sandra O
    Keywords: local economic development, informal economy, Philippines, développement économique local, économie informelle, Philippines, desarrollo económico local, economía informal, Filipinas
    Date: 2012
  3. By: Edoardo Di Porto (MEMOTEF, Department "Sapienza" University of Rome and EQUIPPE USTL/Lille); Leandro Elia (Institute for the Protection and Security of the Citizen European Commission-Joint Research Centre); Cristina Tealdi (IMT Lucca Institute for Advanced Studies)
    Abstract: We analyze how different policy interventions may incentive the transition of workers from the informal to the formal sector. We use Italian data over the period 1998-2008 to evaluate ex post whether the 2003 Italian labor market reform was able to reach the objective to reduce the share of shadow employment. Based on our empirical results, we develop an ex ante evaluation based on a search and matching model, á la Mortensen and Pissarides to determine the right combination of policy interventions which may be effective in generating a significant reduction in undeclared work together with an expansion of the formal sector. We find that in an economy where permanent and temporary contracts coexist, the combination of lower payroll taxes for permanent jobs and higher probability of being audited generates a compression of the informal sector, leaving unemployment unchanged. A similar result can be obtained through a reduction of the firing cost associated with permanent jobs, even though this causes temporary contracts to increase relatively more than permanent contracts.
    Keywords: Labor tax evasion, temporary contracts, firing costs, search frictions, policy evaluation
    JEL: J38 J63 J64 H26
    Date: 2013–06
  4. By: Alejandro Del Valle (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales [EHESS] - Ecole des Ponts ParisTech - Ecole normale supérieure de Paris - ENS Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: This article analyzes whether the large scale provision of non-contributory health services encourages workers to move away from jobs that pay contributions to social security (formal employment). Using a difference-in-differences design, that exploits the variation generated by the municipal level roll-out of an intervention of this kind in Mexico, this paper finds that contemporaneous program exposure has no impact on the ratio of formal to total employed and that lagged exposure leads only to a small (0.78 percentage points) decrease. Two proxies of spillover effects further reveal that this estimate is robust and that the upper-bound of program effect is only moderately larger (1.5 percentage points).
    Keywords: Labor Markets ; Health Provision ; Informality ; Spillover Effects
    Date: 2013–06–24
  5. By: Dhillon, Amrita (Department of Economics, University of Warwik); Iversen, Vegard (Department of Economics, University of Manchester); Torsvik, Gaute (Department of Economics, University of Bergen)
    Abstract: We study an important mechanism underlying employee referrals into informal low skilled jobs in developing countries. Employers can exploit social preferences between employee referees and potential workers to improve discipline. The profitability of using referrals increases with referee stakes in the firm, and, in most cases, with the strength of the social tie between the referee and the new recruit. We provide an empirical counterpart to these results using primary data covering low- and unskilled migrants in India. Consistent with the theoretical predictions, we find a high prevalence of workplace referral and strong kinship ties between referees and new recruits. Finally, workplace intermediaries are different from and typically in more ‘prestigious’ jobs than those recruited.
    Keywords: networks; low- and unskilled jobs; India; moral hazard; employee referrals; efficiency wages; referee incentives; strength of ties
    JEL: D82 D86 J31 J41 O12 O17
    Date: 2013–06–12
  6. By: Lu, L. (Tilburg University)
    Abstract: Abstract: The Chinese economy has grown at a spectacular speed during the past three decades while the financial system is not well developed in China. On the one hand, the informal financing channels, i.e. borrowing from family members, friends, moneylenders, trade credit, etc., may provide proper financing for the firms in China. On the other hand, the increasing intensity of banking competition may also enhance the access to finance in China. Chapter 1 introduces the Chinese economy; Chapter 2 shows the effect of trade credit on the export in China; Chapter 3 shows the effect of informal finance on the microenterprises in rural China; Chapter 4 shows the effect of co-funding on the growth of private firms in China; Chapter 5 shows the effect of the banking competition on alleviating the credit constraints of Chinese SMEs. The thesis basically supports the enhancing role of informal finance and the necessity of increasing the banking competition in China.
    Date: 2013
  7. By: Vincenzo Caponi
    Abstract: We combine the New Immigrant Survey (NIS), which contains information on US legal immigrants, with the American Community Survey (ACS), which contains information on all immigrants to the U.S., legal and illegal ones. Using econometric methodology proposed by Lancaster and Imbens (1996) we compute the probability for each observation in the ACS data to refer to an illegal immigrant, conditional on observed characteristics. The results for illegal versus legal immigrants are novel, since no other work has quanti ed the characteristics of illegal immigrants from a random sample. We nd that, compared to legal immigrants, illegal immigrants are more likely to be less educated, males, and married with spouse not present. These results are heterogeneous across education categories, country of origin (Mexico) and whether professional occupations are included or not in the analysis. Forecasts for the distribution of certain legal and illegal characteristics match those available from other sources, such as aggregate imputations by the Department of Homeland Security for illegal immigrants
    Keywords: legal immigrants; illegal immigrants; contaminated controls
    JEL: J15 F22
    Date: 2013–04
  8. By: Stephanie Jones (Dr Stephanie Jones, Associate Professor, Organizational Behavior, Maastricht School of Management)
    Abstract: Purpose: The cost of global piracy has been estimated at $15-25 billion. During 2011, piracy reached an all-time high, but decreased in 2012. Although piracy remains an ongoing threat to world trade and raises commodity costs, piracy activity is being reduced; but the complete resolution of the issue is still challenging. Methodology: Based on a literature review of formal and informal published sources, this exploratory article attempts a diagnostic evaluation of the challenges facing shippers, shipowners, ships, crews – and governments, industry associations, and insurers – and their attempts at combating this worldwide scourge. Findings: Most attempted solutions currently in force are preventative measures on a ship-by-ship basis, and piecemeal efforts by specific shipping companies and insurers. There is widespread recognition that the piracy problem needs to be tackled at source through „following the money‟ – outlawing pirate warlords – and through united international initiatives, but in reality neither of these developments are taking place.Practical implications: The huge cost to the consumer continues, with an overall lack of appreciation of the need to make a cost-benefit analysis of the value of concerted international efforts to stem piracy. Originality: most articles in this field consider specific anti-piracy efforts in particular locations by certain organizations, without an overall analysis of how the piracy issue could be fundamentally tackled. There is a gap in the literature for an up-to-date, analytical study of maritime piracy worldwide, especially given the dramatic nature of the changes over the last 12-18 months.
    Keywords: maritime piracy, shipping, world trade, commodities
    JEL: A1 F1 F4 R4
    Date: 2013–06

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