nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2013‒08‒23
eight papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Re-assessing the merits of measuring tax evasions through surveys: Evidence from Serbian firms By Kundt, Thorben C.; Misch, Florian; Nerré, Birger
  2. Tax evasion, tax corruption and stochastic growth By Fred Célimène; Gilles Dufrénot; Gisèle Mophou; Gaston N’Guérékata
  3. Profit shifting and 'aggressive' tax planning by multinational firms: Issues and options for reform By Fuest, Clemens; Spengel, Christoph; Finke, Katharina; Heckemeyer, Jost; Nusser, Hannah
  4. Household enterprises in Mozambique : key to poverty reduction but not on the development agenda ? By Fox, Louise; Sohnesen, Thomas Pave
  5. Microfinance and Moneylenders: Long-run Effects of MFIs on Informal Credit Market in Bangladesh By Berg, Claudia; Emran, M. Shahe; Shilpi, Forhad
  6. Efectos de los ingresos no reportados en el nivel y tendencia de la pobreza laboral en México By Raymundo M. Campos-Vazquez
  7. Pobreza y desigualdad en México: identificación y diagnóstico By Raymundo M. Campos-Vazquez
  8. File-Sharing and Film Revenues: An Empirical Analysis By McKenzie, Jordi; Walls, W. D.

  1. By: Kundt, Thorben C.; Misch, Florian; Nerré, Birger
    Abstract: This paper addresses the major weakness of measuring tax evasion through business and household surveys, namely the reluctance of respondents to answer truthfully due to the threat of disclosure. First, we assess the merits of a novel questioning method to gather information about tax evasion by means of business surveys. This approach allows estimating the prevalence of tax evasion, but it does not allow identifying whether the individual firm engages in tax evasion or not, therefore providing incentives for survey participants to answer truthfully. Second and contrary to most other business surveys, we differentiate between two common modes of tax evasion, namely underreporting of sales and informal supplements to official wages ('envelope wages'). Using evidence from Serbia, we show that the estimated share of firms which underreport sales and wages, respectively, by at least 10% is higher under the crosswise model compared to the case when conventional questioning methods applied in business surveys such as the World Bank Enterprise Surveys are used. However, the difference is only significant with respect to sales. These results appear to be robust to a number of modifications, and we explore various potential causes that lead to these results. --
    Keywords: tax evasion,shadow economy,measurement,developing countries
    JEL: H20 E62
    Date: 2013
  2. By: Fred Célimène; Gilles Dufrénot; Gisèle Mophou; Gaston N’Guérékata
    Abstract: This paper presents a continuous time stochastic growth model to study the e¤ects of tax evasion and tax corruption on the level and volatil- ity of private investment and public spending. Our results suggest that there do exist several regimes of mean growth and growth volatility, de- pending upon the consumers degree of risk aversion, the tax income yield, the risk-adjusted return of the agents portfolio, the productivity of public spending. We …nd that public spending is described asymptotically by an incomplete upper Gamma distribution, while private capital is described by a power law distribution. Depending upon the values of the parame- ters of these distributions, growth can be characterized by extreme values (high volatility) when the return to taxation lies under a certain threshold and/or when the risk-adjusted return of investing the proceeds of illegal activities evolves above a given threshold. We provide an empirical illus- tration of the model.
    Keywords: Stochastic growth; tax evasion; tax corruption
    JEL: H26 D91 O41
    Date: 2013–02–15
  3. By: Fuest, Clemens; Spengel, Christoph; Finke, Katharina; Heckemeyer, Jost; Nusser, Hannah
    Abstract: This paper discusses the issue of profit shifting and 'aggressive' tax planning by multinational firms. The paper makes two contributions. Firstly, we provide some background information to the debate by giving a brief overview over existing empirical studies on profit shifting and by describing arrangements for IP-based profit shifting which are used by the companies currently accused of avoiding taxes. We then show that preventing this type of tax avoidance is, in principle, straightforward. Secondly, we argue that, in the short term, policy makers should focus on extending withholding taxes in an internationally coordinated way. Other measures which are currently being discussed, in particular unilateral measures like limitations on interest and license deduction, fundamental reforms of the international tax system and country-by-country reporting, are either economically harmful or need to be elaborated much further before their introduction can be considered. --
    Keywords: tax avoidance,profit shifting,multinational firms,intellectual property,tax policy,tax reform
    JEL: H20 H25 F23 K34
    Date: 2013
  4. By: Fox, Louise; Sohnesen, Thomas Pave
    Abstract: Household enterprises -- usually one-person-operated tiny informal enterprises -- are a rapidly growing source of employment in Sub-Saharan Africa, especially in lower-income countries. Household enterprises tend to operate with limited interest or support from governments. This is the case in Mozambique, where neither the poverty reduction strategy nor small and medium enterprise development policies include household enterprises. Using multiple household surveys, including a recent panel data set, this paper identifies the characteristics of the sector and its development during the period in which Mozambique experienced rapid economic growth. The analysis finds that household enterprises in Mozambique are associated with higher household consumption, lower rural poverty, as well as upward mobility, particularly for rural and poorly educated households. But if the Mozambican government wants to tap this potential, it will need a different strategy than one designed to support small and medium enterprises, because creation and survival in this sector seems to depend on a set of factors related to the human capital in the household and development in the location, not the soft business environment constraints, such as licensing and permitting and corruption, which are cited by larger business.
    Keywords: Access to Finance,Rural Poverty Reduction,Housing&Human Habitats,Regional Economic Development
    Date: 2013–08–01
  5. By: Berg, Claudia; Emran, M. Shahe; Shilpi, Forhad
    Abstract: Using two surveys from Bangladesh, this paper provides evidence on the effects of microfinance competition on village moneylender interest rates and households’ dependence on informal credit. The views among practitioners diverge sharply: proponents claim that MFI competition reduces both the moneylender interest rate and households’ reliance on informal credit, while the critics argue the opposite. Taking advantage of recent econometric approaches that address selection on unobservables without imposing the standard exclusion restrictions, we find that the MFI competition does not reduce moneylender interest rates, thus partially repudiating the proponents. The effects are heterogeneous; there is no perceptible effect at low levels of MFI coverage, but when MFI coverage is high enough, the moneylender interest rate increases significantly. In contrast, households’ dependence on informal credit tends to go down after becoming MFI member, which contradicts part of the critic’s argument. The evidence is consistent with a model where MFIs draw away better borrowers from the moneylender, and fixed costs are important in informal lending.
    Keywords: Microfinance, Moneylenders, Microcredit, Interest Rates, Informal Borrowing, Long-run Effects, Bangladesh, Identification through Heteroskedasticity
    JEL: C31 O12 O17
    Date: 2013–08–01
  6. By: Raymundo M. Campos-Vazquez (El Colegio de Mexico)
    Abstract: The proportion of wage workers with missing labor income has recently increased in Mexico. In this article, I correct the missing labor income through imputation methods. The official measurement of labor poverty indicates an increase from 42 to 53% in the 2005-2012 period, but poverty measured with imputed income increases only from 36 to 40%, a much lower increase than the one we observe. The results imply that policy makers should include in their statistics individuals with missing income and report statistics with and without correcting for missing income.
    Keywords: discrimination; gender; race; labor market; Mexico; hiring; Correspondence study
    JEL: I24 J10 J16 J70 O54
    Date: 2013–02
  7. By: Raymundo M. Campos-Vazquez (El Colegio de Mexico)
    Abstract: El artículo brinda un diagnóstico general sobre la pobreza laboral y desigualdad en México utilizando datos de la Encuesta Nacional de Ocupación y Empleo para el periodo 2005-2012 y la definición de pobreza laboral utilizada por el Consejo Nacional de Evaluación de la Política de Desarrollo Social. Primero, la proporción de hogares en pobreza laboral puede variar dependiendo cómo se defina. La población trabajadora que no quiere revelar sus ingresos ha ido en aumento en México. Encuentro que en lugar de que la pobreza laboral ha aumentado 25%, con el método de imputación únicamente ha aumentado 11% aproximadamente para el periodo 2005-2012. Asimismo, los ingresos entre los más pobres han aumentado en términos relativos más que los ingresos de los más ricos, lo que ha ocasionado una ligera disminución en la desigualdad de ingresos laborales en el país. Segundo, los hogares pobres y no pobres son diferentes principalmente por dos razones: los hogares pobres tienen menos trabajadores, especialmente mujeres y los trabajos que tienen son de menor calidad. Tercero, el problema de la pobreza es un fenómeno estructural. Ante eso, el impacto de una política de fomentar la participación laboral femenina es mucho mayor que una de formalización en la economía. Por tanto, se sugiere poner especial atención para fomentar la oferta laboral femenina especialmente entre los hogares en situación de pobreza.
    Keywords: inequality; labor income; jobs; employment; Mexico
    JEL: D63 I30 I32 O54
    Date: 2013–08
  8. By: McKenzie, Jordi; Walls, W. D.
    Abstract: This study examines the impact of peer-to-peer (P2P) file-sharing on the Australian theatrical film industry. Using a large data set of torrent downloads observed on three popular P2P networks, we find evidence of a sales displacement effect on box office revenues. However, although statistically significant, the economic significance of this displacement appears relatively small. To establish causality, we make use of two precedent-setting Australian Federal Court case rulings, as well as observed levels of contemporaneous downloading in geographically separated markets within Australia. We observe that the release gap between the US and Australian markets is a key contributor to piracy early in a film's theatrical life; this finding provides a partial explanation for the industry's move toward coordinated worldwide rele ases.
    Date: 2013–07

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