nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2014‒01‒10
eight papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Does the Nigerian formal sector pay more than its informal sector? By Alberto Behar
  2. The formal and informal sectors in Colombia : country case study on labour market segmentation By Peña, Ximena
  3. Dual dimensions of non-regular work and SMEs in the Republic of Korea country case study on labour market segmentation By Ha, Byung-jin; Lee, Sangheon
  4. Employment growth and segmentation in Peru, 2001-2011 : country case study on labour market segmentation By Jaramillo, Miguel
  5. The effect of awareness and incentives on tax evasion By Annette Alstadsæter; Martin Jacob
  6. Taxing Cash to Fight Collaborative Tax Evasion? By Giovanni Immordino; Francesco Flaviano Russo
  7. The elasticity of taxable income and income-shifting between tax bases: what is “real” and what is not? By Jarkko Harju; Tuomas Matikka
  8. Role of regulation in micro finance: application of the Micro Savings Requirement Scheme in informal sectors By Marianne, Ojo

  1. By: Alberto Behar
    Abstract: Nigerian data from the early 2000s indicates that formal sector earnings are about 70% higher than informal sector earnings but, for men, part of this is due to an educational composition effect. The returns to education are lower in the informal sector than in the formal sector, but mainly at the post-secondary stage because formal sector earnings are more convex in education. We find no evidence that other skill acquisition methods contribute to earnings, but apprenticeships are positively associated with selection into the informal sector while vocational training or other courses tend to be coupled with work in the formal sector. These results are subject to a number of interpretations, so it remains an open question whether a person with given observed or unobserved characteristics would earn more in the formal sector.
    Date: 2013
  2. By: Peña, Ximena
    Keywords: labour market segmentation, unemployment, wages, informal economy, labour legislation, comment, case study, Colombia, segmentation du marché du travail, chômage, salaire, économie informelle, législation du travail, commentaire, étude de cas, Colombie, segmentación del mercado de trabajo, desempleo, salario, economía informal, legislación del trabajo, comentario, estudio de casos, Colombia
    Date: 2013
  3. By: Ha, Byung-jin; Lee, Sangheon
    Keywords: precarious employment, labour market segmentation, small enterprise, Korea R, emploi précaire, segmentation du marché du travail, petite entreprise, Corée R, empleo precario, segmentación del mercado de trabajo, pequeña empresa, Corea R
    Date: 2013
  4. By: Jaramillo, Miguel
    Keywords: employment, employment security, labour market segmentation, Peru, emploi, sécurité de l'emploi, segmentation du marché du travail, Pérou, empleo, seguridad en el empleo, segmentación del mercado de trabajo, Perú
    Date: 2013
  5. By: Annette Alstadsæter (University of Oslo); Martin Jacob (WHU – Otto Beisheim School of Management)
    Abstract: We examine the role of tax incentives and tax awareness on tax evasion. We are able to observe tax evasion of business owners in rich Swedish administrative panel data. During the period of 2006-2009, around 5% of tax returns overstate a claimed dividend allowance even after the tax authority has approved the returns. Tax awareness decreases and complexity increases the likelihood of misreporting. Our results indicate that some of the observed misreporting could be accidental while some misreporting is deliberate tax evasion. We identify a positive and significant effect of tax rates on tax evasion by exploiting a large kink in the tax schedule.
    Keywords: Tax evasion, tax compliance, misreporting, tax awareness, income taxation
    JEL: H26 H24 D14
    Date: 2013
  6. By: Giovanni Immordino (Università di Salerno and CSEF); Francesco Flaviano Russo (Università di Napoli Federico II and CSEF)
    Abstract: We build a model of collaborative tax evasion where a buyer negotiates a price discount with a seller in exchange for not asking the receipt and paying cash, which eases tax evasion. Sellers and buyers are heterogeneous with respect to their honesty and to their cost of managing non cash payment instruments. We study the effect of two policy instruments, a tax rebate for the buyer that keeps the receipts and a tax on cash withdrawals (TCW), on tax evasion and government revenue. We find that a mix of these two instruments can reduce tax evasion and increase revenue. The TCW is effective only if sufficiently high, and it must be higher the higher the tax evasion in the country and the bigger the mass of individuals that typically pays in cash. We discuss the implementation problems of the TCW and we suggest how to partially overcome them.
    Keywords: collaborative tax evasion; tax on cash
    JEL: O17 H21
    Date: 2014–01–02
  7. By: Jarkko Harju (Government Institute for Economic Research, Finland); Tuomas Matikka (Government Institute for Economic Research, Finland)
    Abstract: Previous literature shows that income taxation especially affects the behaviour of business owners and entrepreneurs. However, it is still unclear how much of the response is due to changes in effort and other real economic activity, and how much is due to tax avoidance and tax evasion. This is important because the nature of the response largely affects the welfare implications and policy recommendations. In this paper we distinguish between real responses and tax-motivated income- shifting between tax bases using the widely-applied elasticity of taxable income (ETI) framework. We use extensive register-based panel data on both the owner and firm-level, which enable us to carefully distinguish between real effects and income-shifting among the owners of privately held corporations in Finland. Our results show that income-shifting accounts for over two thirds of the overall ETI. As the shifted income is also taxed, this significantly decreases the marginal excess burden of income taxation compared to the standard model in which the overall ETI defines the welfare loss. However, in addition to income-shifting effects, we find that dividend taxation significantly affects the real behaviour of the owners.
    Keywords: Personal income taxation, Elasticity of taxable income, Business owners, Tax avoidance
    JEL: H24 H25 H32
    Date: 2013
  8. By: Marianne, Ojo
    Abstract: This paper not only addresses how linkages, direct and facilitating linkages, can benefit microfinance institutions – and particularly in jurisdictions where the Savings Group Outreach involvement is particularly low, but also illustrates ways and means whereby group lending and other more recent innovative methods used by micro lenders to secure repayments, could increase the desired effects, efficiency and impact of microfinance in selected jurisdictions. In so doing, it addresses some of the existing and persisting problems of micro finance in rural areas. An innovative aspect of the paper is evidenced through its recommendation of the Micro-Savings Requirement Scheme - which offers numerous benefits – as will be highlighted in this paper.
    Keywords: microfinance; regulation; agency theory; micro-savings requirement scheme.
    JEL: D8 G2 K2
    Date: 2013–11–06

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