nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2013‒11‒02
six papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Informality and Mobility: Evidence from Russian Panel Data By Slonimczyk, Fabian; Gimpelson, Vladimir
  2. The Formal Sector Wage Premium and Firm Size for Self-employed Workers By Olivier Bargain; Eliane El Badaoui; Prudence Kwenda; Eric Strobl; Frank Walsh
  3. The Path to Higher Growth: Does Revamping Japan’s Dual Labor Market Matter? By Chie Aoyagi; Giovanni Ganelli
  4. Missing Trader Fraud in European VAT By Sebastian Pfeiffer; Pavel Semerad
  5. Persistence or Convergence? The East-West Tax Morale Gap in Germany By Möhlmann, Axel
  6. Critérios de Classificação Para Ocupação Informal: Consequências Para a Caracterização do Setor Informal e Para a Análise de Bem-Estar no Brasil By Carlos Henrique Corseuil; Maurício Cortez Reis; Alessandra Scalioni Brito

  1. By: Slonimczyk, Fabian (Higher School of Economics, Moscow); Gimpelson, Vladimir (CLMS, Higher School of Economics, Moscow)
    Abstract: Informality is a defining characteristic of labor markets in developing and transition countries. This paper analyzes patterns of mobility across different forms of formal and informal employment in Russia. Using the RLMS household panel we estimate a dynamic multinomial logit model with individual heterogeneity and correct for the initial conditions problem. Simulations show that structural state dependence is weak and that transition rates from informal to formal employment are not lower than from other origin states. These results lend support to the integrated view of the labor market.
    Keywords: informality, labor mobility, initial conditions problem, state dependence
    JEL: J6
    Date: 2013–10
  2. By: Olivier Bargain (Aix-Marseille School of Economics); Eliane El Badaoui (Université de Cergy-Pontoise); Prudence Kwenda (University College Dublin); Eric Strobl (Ecole Polytechnique Paris); Frank Walsh (University College Dublin)
    Abstract: We develop a model where workers may enter self-employment or search for jobs as employees and where there is heterogeneity across workers’ managerial ability. Workers with higher skills will manage larger firms while workers with low managerial ability will run smaller firms and will be in self-employment only when they cannot find a salaried job. For these workers self-employment is a secondary/informal form of employment. The Burdett and Mortensen (1998) equilibrium search model is used for illustration as a special case of our more general framework. Empirical evidence from Mexico is provided and demonstrates that firm size wage effects for employees and selfemployed workers are broadly consistent with the model.
    Keywords: Self-employment, Managerial ability, Informal sector
    JEL: J31 O17
    Date: 2013–10–23
  3. By: Chie Aoyagi; Giovanni Ganelli
    Abstract: This paper argues that Japan’s excessive labor market duality can reduce Total Factor Productivity (TFP) due to a negative impact on non-regular workers’ effort and on firms’ incentives to train them. On the basis of cross-country empirical evidence, the paper proposes some reform options. In particular, our analysis suggests that reducing the difference in employment protection between regular and non-regular workers would substantially reduce labor market duality in Japan. One reform consistent with these findings is the introduction of a Single Open Ended Contract for all newly hired workers. This reform could be complemented by a shift towards a model that combines labor market flexibility and security (“flexicurityâ€) and by policies aimed at encouraging wage growth.
    Keywords: Labor markets;Japan;Employment policy;Economic growth;Labor productivity;Labor market reforms;Japan; dual labor market; labor market reform; Single Open Ended Contract.
    Date: 2013–10–01
  4. By: Sebastian Pfeiffer (Institute for Austrian and International Tax Law, Vienna University of Economics and Business); Pavel Semerad (Department of Accounting and Taxes, Faculty of Business and Economics, Mendel university in Brno)
    Abstract: This article deals with various aspects of carousel frauds in which missing traders play a crucial role during intra-union transactions. The most important question is how to stop this kind of crime, which causes a huge tax gap in collecting value added tax. In this paper a detailed analysis of fraud patterns including model calculations was carried out. Very important for tax administration in the European Union are judgments of the European Court of Justice dealing with questions concerning the controversial parts and interpretations of the law in Member States and the Directive. Several judgments from Austria, the Czech Republic and Germany aimed at fraud in value added tax were used. Special emphasis is devoted to the solution to tackle VAT and carousel frauds. The opinions of the authors and the European Union are discussed and new planned solutions to fraud are examined as well. Although QRM allows Member States to apply for an exemption to introduce reverse charge mechanism, the Czech Republic is used as a model example to show legal solutions after earlier unsuccessful application for reverse charge mechanism on fuel sale.
    Keywords: Carusel fraud, missing trader, value added tax, tax evasion
    JEL: H20 H26
    Date: 2013–10
  5. By: Möhlmann, Axel
    Abstract: This paper studies differences in tax morale attitudes between East and West Germany using multiple recent data sets. Contrary to previous 1990s evidence, but in line with recent studies on an east-west mentality gap, we find a persistent higher tax morale in East Germany and no indication of convergence over time. Distinguishing between region of living and birth and periods of within-country migration reveals that the East Germans who stayed determine the results and that migration vanishes differences. Regional economic heterogeneity of tax revenue transfers cannot explain the results. We find a framing effect on the tax morale gap with questions phrasing tax paying as the duty of a good citizen. This result suggests no gap of tax morale with moral reasoning related to the social order and citizenry.
    Keywords: tax morale, German reunification, east-west differences, convergence, moral reasoning
    JEL: H26 H73
    Date: 2013–03–15
  6. By: Carlos Henrique Corseuil; Maurício Cortez Reis; Alessandra Scalioni Brito
    Abstract: O objetivo deste texto é identificar a sensibilidade da caracterização do trabalhador informal a distintos critérios de classificação e mostrar como a relação entre informalidade e medidas de bem-estar dos trabalhadores varia de acordo com o critério de classificação adotado. Como contribuições à literatura, tem-se a análise desagregada para os grupos de empregados e empresários e o uso de um método recém-disponibilizado para classificar os empresários em formais ou informais, baseado na informação sobre a inclusão no Cadastro Nacional de Pessoa Jurídica (CNPJ). De forma geral, tanto a caracterização do setor informal como a relação entre informalidade e bem-estar são muito parecidas em dois dos três critérios usados; que são: i) no critério via contribuição à previdência; e ii) no critério baseado no CNPJ para empresários e na carteira de trabalho para empregados. In this paper we aim to analyze how sensible is the informal worker profile to distinct classification procedures, as well as to analyze the sensibility of the link between informality and welfare to the same procedures. A disaggregated analysis by employers and employees is one contribution of the paper, which also innovates using information on being included in an official tax payer administrative file (CNPJ) to one of the classification procedures employed to the employers. Two out of three procedures share very similar results in terms of informal worker profile and the link between informality and welfare. These are the procedure based on social security contribution, and the one based on CNPJ for employers and based on legal labor contracts for employees.
    Date: 2013–10

This nep-iue issue is ©2013 by Catalina Granda Carvajal. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.