nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2014‒02‒08
thirteen papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Income Tax Buyouts and Income Tax Evasion By Laszlo Goerke
  2. The hidden costs of tax evasion: collaborative tax evasion in markets for expert services By Loukas Balafoutas; Adrian Beck; Rudolf Kerschbamer; Matthias Sutter
  3. Circumstantial Risk: Impact of Future Tax Evasion and Labor Supply Opportunities on Risk Exposure By Doerrenberg, Philipp; Duncan, Denvil; Zeppenfeld, Christopher
  4. Reciprocal relationships in tax compliance decisions By Cécile Bazart; Aurélie Bonein
  5. 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. Fear of Labor Rigidities – The Role of Expectations in Employment Growth in Peru By Pablo Lavado; Gustavo Yamada
  7. Vertical Linkage between Formal and Informal Credit Markets, Corruption and Credit Subsidy policy: A Note By Chaudhuri, Sarbajit; Ghosh Dastidar, Krishnendu
  8. Social service delivery and access to financial innovation. The impact of Oportunidades’ electronic payment system in Mexico By Masino, Serena; Niño-Zarazúa, Miguel
  9. "Graduated Response Policy and the Behavior of Digital Pirates: Evidence from the French Three-Strike (Hadopi) Law" By MICHAEL ARNOLD; ERIC DARMON; SYLVAIN DEJEAN; THIERRY PENARD
  10. Effects of Taxation on Software Piracy Across the European Union By Nicolas Dias Gomes; Pedro André Cerqueira; Luís Alçada Almeida
  11. The Value of Connections: Evidence from the Italian-American Mafia By Mastrobuoni, Giovanni
  12. O Bolsa Família e a Oferta de Trabalho das Famílias By Alan de Brauw; Daniel O. Gilligan; John Hoddinott; Shalini Roy
  13. A Distribuição de Profissionais Técnico-Científicos Pelo Território Brasileiro em 2000 e 2010 By Aguinaldo Nogueira Maciente; Rafael Henrique Moraes Pereira; Paulo A. Meyer M. Nascimento

  1. By: Laszlo Goerke (Institute for Labour Law and Industrial Relations in the EU, University of Trier)
    Abstract: A tax buyout is a contract between tax authorities and a tax payer which reduces the marginal income tax rate in exchange for a lump-sum payment. While previous contributions have focussed on labour supply, we consider the interaction with tax evasion and show that a buyout can increase expected tax revenues. This will be the case if (1) the audit probability is constant and the penalty for evasion is a function of undeclared income or (2) the penalty depends on the amount of taxes evaded, and authorities use information about income generated by the decision about a tax buyout offer when setting audit probabilities. Since individuals will only utilise a tax buyout if they are better off, higher tax revenues imply that such contracts can be Pareto-improving.
    Keywords: Asymmetric information, Revenues, Self-selection, Tax buyouts, Tax evasion
    JEL: D82 H21 H24 H26
    Date: 2014–01
  2. By: Loukas Balafoutas; Adrian Beck; Rudolf Kerschbamer; Matthias Sutter
    Abstract: In markets where transactions are governed by contractual incompleteness, revealed intentions to evade taxes may affect market performance. We experimentally examine the impact of tax evasion attempts on the performance of credence goods markets, where contractual incompleteness results from asymmetric information on the welfare maximizing quality of the good. We find that tax evasion attempts – independently of whether they are successful or not – lead to efficiency losses in the form of too low quality and less frequent trade. Thus, shadow economies induce an excess burden not only by hampering the collection of tax revenues, but also by reducing market efficiency.
    Keywords: Credence goods, expert services, tax evasion, fraud, experiment
    JEL: C72 C91 D82 H26
    Date: 2014
  3. By: Doerrenberg, Philipp (University of Cologne); Duncan, Denvil (Indiana University); Zeppenfeld, Christopher (University of Cologne)
    Abstract: This paper examines whether risk-taking in a lottery depends on the opportunity to respond to the lottery outcome through additional labor effort and/or tax evasion. Previous empirical attempts to answer this question face identification issues due to self-selection into jobs that facilitate tax evasion and labor effort flexibility. We address these identification issues using a laboratory experiment (N = 180). Subjects have the opportunity to invest earned income in a lottery and, depending on randomly assigned treatment states, have the opportunity to respond to the lottery outcome through evasion and/or extra labor effort. We find strong evidence that ex-post access to labor opportunities reduces ex-ante risk willingness while access to tax evasion has no effect on risk behavior. We discuss possible explanations for this result based on the existing literature.
    Keywords: tax evasion, labor supply, risk behavior, lab experiment
    JEL: G11 H21 H24 H26 J22
    Date: 2014–01
  4. By: Cécile Bazart (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - Université Montpellier I - CNRS : UMR5474 - Institut national de la recherche agronomique (INRA) : UR1135 - Centre international de hautes études agronomiques méditerranéennes [CIHEAM]); Aurélie Bonein (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes 1 - Université de Caen Basse-Normandie)
    Abstract: Reciprocity considerations are important to the tax compliance problem as they may explain the global dynamics of tax evasion, beyond individual tax evasion decisions, toward a downward or upward spiral. To provide evidence on reciprocity in tax compliance decisions, we have conducted a laboratory experiment in which we introduced two types of inequities. The first type of inequity is called vertical, because it refers to inequities introduced by the government when it sets different fiscal parameters for identical taxpayers, while the second type of inequity is called horizontal because it refers to the fact that taxpayers may differ in tax compliance decisions. In this setting, taxpayers may react to a disadvantageous or advantageous inequity through negative or positive reciprocal behaviors, respectively. Our results support the existence of negative and positive reciprocity in both vertical and horizontal cases. When both inequities come into play and may induce reciprocal behaviors in opposite directions, the horizontal always dominates the vertical.
    Keywords: Behavioral economics; experimental economics; fairness; tax evasion; tax compliance
    Date: 2014
  5. By: Alejandro Del Valle (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [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
  6. By: Pablo Lavado (Departamento de Economía, Universidad del Pacífico); Gustavo Yamada (Departamento de Economía, Universidad del Pacífico)
    Abstract: Many studies have been conducted to analyze the effect of stricter Employment Protection Legislation (EPL). However, almost all of them has focused on an ex-post impact; leaving aside a second but equally important channel: expectations. This paper aims to analyze the role of expectations on peruvian formal and informal labor market; using news as our identification variable. We use the monthly number of news related to the approval of the General Labor Law (GLL), a proposal entailing future stronger labor rigidities, from January 2001 to May 2012. Using the Permanent Employment Survey (EPE), we find a negative relation between expectations towards a stricter labor market and both employment and average income. News mainly affect formal occupied EAP, arousing a substitution effect from formal to informal employment. We also discover that the effect of expectations differs in periods with higher versus lower GDP growth. Finally, we find some evidence supporting news having a cumulative effect: the larger the previous stock of news, the weaker the effect.
    Keywords: Fear, Labor, Rigidities, Role, Expectations, Employment, Growth, Peru , Perú, News, EAP
    JEL: D22 D24 D81 D82 D84 D92 E24 E26 J0 J20 J22 J23 J28 J38 J64 J68 J80 J81 J83 J88
    Date: 2013–12
  7. By: Chaudhuri, Sarbajit; Ghosh Dastidar, Krishnendu
    Abstract: We develop a model of vertical linkage between the formal and informal credit markets which highlights the presence of corruption in the distribution of formal credit. The existing moneylender, the bank official and the new moneylenders move sequentially and the existing moneylender acts as a Stackelberg leader and unilaterally decides on the informal interest rate. The analysis distinguishes between two different ways of designing a credit subsidy policy. If a credit subsidy policy is undertaken through an increase in the supply of institutional credit, it is likely to increase the competitiveness in the informal credit market and lower the informal sector interest rate under reasonable parametric restrictions. Any change in the formal sector interest rate has no effect. However, an anticorruption measure (increase in penalty) unambiguously lowers the interest rate in the informal credit market. Finally, we examine the effects of alternative policies on the incomes of different economic agents in our model.
    Keywords: Formal/informal credit markets, informal interest rate; corruption; credit subsidy policy, anticorruption measures
    JEL: O1 O16 O17
    Date: 2014–01–01
  8. By: Masino, Serena; Niño-Zarazúa, Miguel
    Abstract: This paper follows a quasi-experimental research design to assess the impact of the electronic payment system of Mexico’s Oportunidades programme. The switch from cash payments to electronic payments delivered via a bank account is found to have implications in terms of reallocation between saving portfolio choices, transaction costs, and coping strategies. The study shows that, following the intervention, participation in informal saving arrangements was reduced, the frequency of remittance reception increased and, when hit by idiosyncratic shocks, beneficiaries of bank accounts were more likely to use savings rather than contracting loans or reducing consumption to cope with the events. The study also reveals impact heterogeneity between rural and urban areas, with important implications for policy and replicability of similar financial innovations in other developing country contexts.
    Keywords: financial inclusion; social service delivery; Oportunidades; conditional cash transfers; quasi-experimental design; Mexico
    JEL: D04 D14 G21 O12
    Date: 2014–02–05
  9. By: MICHAEL ARNOLD (Department of Economics,University of Delaware); ERIC DARMON (CREM, University of Rennes); SYLVAIN DEJEAN (CREM, LR-MOS, University of La Rochelle); THIERRY PENARD (CREM, University of Rennes 1 & University of Delaware)
    Abstract: Most developed countries have tried to restrain digital piracy by strength- ening laws against copyright infringement. In 2009, France implemented the Hadopi law. Under this law individuals receive a warning the first two times they are detected illegally sharing content through peer to peer (P2P) networks. Legal action is only taken when a third violation is detected. We analyze the impact of this law on individual behavior. Our theoretical model of illegal be- havior under a graduated response law predicts that the perceived probability of detection has no impact on the decision to initially engage in digital piracy, but may reduce the intensity of illegal file sharing by those who do pirate. We test the theory using survey data from French Internet users. Our econometric results indicate that the law has no substantial deterrent effect. In addition, we find evidence that individuals who are better informed about the law and piracy alternatives substitute away from monitored P2P networks and illegally access content through unmonitored channels.
    Keywords: Digital Piracy, digital media, Hadopi, three-strikes law, property rights
    JEL: L82 O34 K42 D11
    Date: 2014
  10. By: Nicolas Dias Gomes (Faculty opf Economics, University of Coimbra and INESC-Coimbra, Portugal); Pedro André Cerqueira (Faculty opf Economics, University of Coimbra and GEMF, Portugal); Luís Alçada Almeida (Faculty opf Economics, University of Coimbra and INESC-Coimbra, Portugal)
    Abstract: This paper explores the relation between levels of taxation among different types of households in the European Union and the levels of software piracy from 1996 to 2010. It extends previous works introducing a large panel data set for the European Union and it´s different regions. We estimate our model using the fixed effect, comparing results from the Euro Area and the Countries that joined EU in 2004 and 2007. Results show that levels of taxation increase the levels of software piracy losses; moreover these results depend on marital status and number of children. The weight of taxation on GDP, namely the taxes on consumption, have a positive effect on piracy losses while the impact of inflation is negative and marginal. Additional to this we also found that the relative importance of these taxes in relation to total taxation can affect this phenomenon. An increase in the weight of capital taxation would decrease software piracy while this effect was opposite when considering the relative importance of consumption taxes.
    Keywords: Panel data, personal taxation, software piracy.
    JEL: C23 H20 O52
    Date: 2014–01
  11. By: Mastrobuoni, Giovanni (University of Essex)
    Abstract: Using declassified Federal Bureau of Narcotics records on 800 US Mafia members active in the 1950s and 1960s, and on their connections within the organized crime network, I estimate network effects on gangsters' economic status. Lacking information on criminal proceeds, I measure economic status exploiting detailed information about their place of residence. Housing values are reconstructed using current deflated transactions recorded on I deal with the potential reverse causality between the economic status and the gangster's position in the network exploiting exogenous exposure to potential pre-immigration connections. In the absence of pre-immigration data I use the informational content of surnames, called isonomy, to measure the place of origin. The instrument is valid as long as conditional on the characteristics of the gangsters (including the region of birth and a rich set of controls about the gangsters' legal and illegal activities) such exposure influences the gangsters' importance in- side the network (called centrality) but not the preference for specific housing needs. A standard deviation increase in closeness centrality increases economic status by between one forth (OLS) and one standard deviation (2SLS).
    Keywords: mafia, networks, centrality, housing prices, value of connections, crime, surnames, isonomy
    JEL: A14 C21 D23 D85 K42 Z13
    Date: 2014–01
  12. By: Alan de Brauw (International Food Policy Research Institute); Daniel O. Gilligan (International Food Policy Research Institute); John Hoddinott (International Food Policy Research Institute); Shalini Roy (International Food Policy Research Institute)
    Abstract: Uma preocupação comum acerca dos programas de tranferência de renda é de que eles podem gerar desincentivos para o trabalho. Ao elevar a renda, os recursos transferidos podem incentivar as famílias a desfrutar de mais tempo de lazer (não trabalho) e reduzir sua participação na força de trabalho ou seu número de horas trabalhadas, mesmo as famílias pobres. Evidências de estudos de avaliação de programas de transferência condicionada de renda sugerem que essas preocupações são exageradas ? a maioria dos estudos não encontra efeitos de desincentivo ? no máximo, há reduções modestas na oferta de trabalho (FISZBEIN; SCHADY, 2009). No entanto, foi dada atenção menor ao efeito dos programas de proteção social sobre outras formas de realocação de trabalho. Em particular, programas segmentados e com critérios de elegibilidade em função dos rendimentos do trabalho no setor formal podem incentivar as famílias perto do limiar de elegibilidade a realocar seu trabalho ao setor informal, para garantir a sua elegibilidade. Se este comportamento existe, ele pode vir a ter consequências inesperadas sobre os rendimentos potenciais dessas famílias, bem como sobre o crescimento econômico.
    Keywords: O Bolsa Família e o Oferta de Trabalho das Famílias
    Date: 2013–12
  13. By: Aguinaldo Nogueira Maciente; Rafael Henrique Moraes Pereira; Paulo A. Meyer M. Nascimento
    Abstract: Este texto mapeia a disponibilidade, nas mesorregiões brasileiras, de pessoas com nível superior em áreas selecionadas de ciência, tecnologia, engenharia e matemática (CTEM). Para tanto, utiliza dados dos censos populacionais de 2000 e de 2010 do Instituto Brasileiro de Geografia e Estatística (IBGE). O objetivo da discussão é incorporar a dimensão regional ao debate sobre a disponibilidade de mão de obra qualificada no Brasil, em especial diante da possibilidade de que a atual percepção de escassez deste tipo de mão de obra possa se dar de forma desigual entre as regiões. A distribuição regional de profissionais formados nessas áreas de formação se modificou ao longo da primeira década do século XXI, concentrando-se nas mesorregiões do centro-sul do país, bem como em algumas regiões metropolitanas das regiões Nordeste e Norte. Evidencia-se também que os profissionais de CTEM apresentam uma maior tendência a estarem ocupados com carteira assinada ou como empregadores do que a média das pessoas com diploma de nível superior. Por fim, as atividades de construção, mineração e tecnologia da informação são as que mais empregam profissionais de CTEM, além de serem também aquelas em que estes profissionais mais atuam em ocupações típicas de sua área de formação. This article describes the distribution of Science, Technology, Engineering and Mathematics (STEM) graduates in Brazil according to meso-regions of the 2000 and 2010 population censuses. Changes in the geographic distribution of these professionals over this period are presented, as well as the regions of the country that have a higher concentration of these professionals. Results show that STEM graduates became increasingly concentrated in high-income meso-regions of the South and Southeast in and in the metropolitan regions of the Northeast and North. These professionals show a greater tendency to work as formal-market employees and employer entrepreneurs, relative to other higher-education professionals, who are more likely to work in the informal market or work as non-employing small entrepreneurs. Construction, mining and information-technology industries have the highest percentages of STEM workers among higher-education personnel, and are also the industries in which these workers are more likely to work in typical STEM field occupations.
    Date: 2014–01

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