nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2014‒05‒04
twelve papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. An approximation to the Informal-formal wage gap in Colombia 2008-2012 By Nancy Daza; Luis Fernando Gamboa
  2. Informal Sector and Employment Generation in Nigeria By Yusuf, Sulaimon Aremu
  3. Informality and formality: Fiscal policy in DSGE model By Jesús Botero G.; Christian Vargas; Álvaro Hurtado Rendón; Humberto Franco
  4. Social Assistance and Informality: Examining the link in Colombia By Monica Ospina Londoño; Fabiola Saavedra-Caballero
  5. Not So Standard Anymore? Employment Duality in Germany By Eichhorst, Werner; Tobsch, Verena
  6. Can Tax Compliance Research Profit from Biology? By Benno Torgler
  7. Tax Incidence in the Presence of Tax Evasion By Doerrenberg, Philipp; Duncan, Denvil
  8. What do (disloyal) tax payers do: a taxonomy of the mechanisms of VAT evasion in Italy and proposed remedies By Vincenzo Visco
  9. Horizontal and Vertical Linkages between Formal and Informal Credit Markets in Backward Agriculture: A Theoretical Analysis By Chaudhuri, Sarbajit; Dwibedi, Jayanta
  10. Financial development and patterns of industrial specialization: Regional evidence from China By He , Qing; Xue, Chang; Zhu, Chenqi
  11. Efecto de la política fiscal en un modelo de equilibrio general dinámico con sector informal: una aplicación para Colombia By Fernando Jaramillo; Monica Gomez; Andres Garcia
  12. Bolsa Família, Escolha Ocupacional e Informalidade no Brasil By Ana Luiza Neves de Holanda Barbosa; Carlos Henrique L. Corseuil

  1. By: Nancy Daza; Luis Fernando Gamboa
    Abstract: Abstract: This document provides recent evidence about the persistency of wage gaps between formal and informal workers in Colombia by using a non-parametric method proposed by Ñopo (2008a). Over a rich dataset at a household level during 2008-2012, it is found that formal workers earn between 30 to 60 percent more, on average, than informal workers. Despite of the formality definition - structuralist or institucionalist- adopted, it is clear that formal workers have more economic advantages than informal ones, but after controlling by demographic and labor variables an important fraction of the gap still remains unexplained.
    Keywords: Wage gaps, non-parametric, Colombia, informality
    JEL: J31 C14 O17
    Date: 2013–06–03
  2. By: Yusuf, Sulaimon Aremu
    Abstract: The study examines The Informal Sector and Employment Generation in Nigeria. The study takes a quantitative dimension and employed pure descriptive statistics for its analysis. The study developed the appropriate theoretical framework for the discourse. There is finding that the informal sector plays significant role not only in employment generation but as well as contributing immensely to economic growth. As a result, problems bedevilling the sectors were identified alongside the prospects of the sector to the employment generation and booming of the economy. Ultimately, informal sector employment generation policies measures were highlighted as the way forward.
    Keywords: Informal sector and Employment generation.
    JEL: E26
    Date: 2014–02
  3. By: Jesús Botero G.; Christian Vargas; Álvaro Hurtado Rendón; Humberto Franco
    Abstract: We develop a DSGE model of the Colombian economy to assess the effect of tax policy on informal employment and income distribution.The model recreates a small open economy, with persistent income inequality, a substantial degree of informality, and different possibilities of government intervention. This paper evaluates the consequences of government transfer payments to households with lower incomes. We find that although transfer payments have a positive effect on income distribution, financing them requires an adjustment in government finances (cut spending or increase revenue through the use of various taxes), have negative effects on the economic as a whole. ***** Desarrollamos un modelo DSGE de la economía colombiana para evaluar el efecto de la política fiscal sobre el empleo informal y distribución del ingreso. El modelo recrea una economía pequeña y abierta, con la persistente desigualdad de ingresos, un alto grado de informalidad, y las diferentes posibilidades de intervención del gobierno. Este documento evalúa las consecuencias de los pagos de transferencia del gobierno a los hogares con ingresos más bajos. Encontramos que si bien los pagos de transferencias tienen un efecto positivo sobre la distribución del ingreso, su financiación requiere un ajuste en las finanzas públicas (reducir el gasto o aumentar los ingresos a través del uso de diversos impuestos), tienen efectos negativos sobre la economía en su conjunto.
    Keywords: Public expenditure; exogenous shock; DSGE
    JEL: E62 D58
    Date: 2014–03–11
  4. By: Monica Ospina Londoño; Fabiola Saavedra-Caballero
    Abstract: This paper presents evidence on the labor market effects of social assistance programs in the short and medium run. We evaluate the impacts of a Conditional Cash Transfer program (Familias en Acción) on informality in Colombia. We exploit an exogenous shock linked to cash transfer benefits that the government provides to poor people to evaluate the effect of these benefits on informality. We argue that being a beneficiary of social programs may create perverse incentives that drive people towards informality through a substitution effect. Survey data of “Familias en Acción” program was used to identify whether the program had any effect on workers’ labor decisions concerning participation (or the lack thereof) in the informal labor market in Colombia after one and four years after its implementation. We apply matching algorithms and difference-in-differences estimations to evaluate the effect of the program. We find that a worker’s informality condition may be affected by receiving CCT income and by the structure of the colombian health system.
    Keywords: informality; conditional cash transfers; evaluation
    JEL: E26 C14 H43
    Date: 2013–08–20
  5. By: Eichhorst, Werner (IZA); Tobsch, Verena (E-x-AKT WIRTSCHAFTSFORSCHUNG)
    Abstract: This paper gives an overview of the transformation of the German labour market since the mid-1990s with a special focus on the changing patterns of labour market segmentation or 'dualization' of employment in Germany. While labour market duality in Germany can partially be attributed to labour market reforms promoting, in particular, non-standard forms of employment and allowing for an expansion of low pay, structural changes in the economy as well as strategic choices by employers and social partners also play a prominent role. Our main argument is that the liberalization of non-standard contracts has contributed to the expansion of overall labour market inclusion and job growth in Germany and that at least some forms of non-standard work provide stepping stones into permanent regular jobs. Atypical contracts do not necessarily undermine the dominance of standard employment relationships and job quality in this primary segment but rather form a supplementary part of employment in sectors that depend on more flexible and maybe cheaper forms of labour.
    Keywords: Germany, labour market reforms, dualization, non-standard work
    JEL: J21 J31 J42
    Date: 2014–04
  6. By: Benno Torgler
    Abstract: Historically, tax compliance has been a highly interdisciplinary avenue of research to which economics, psychology, law, sociology, history, political science, and accountancy have made valuable contributions. It is less well understood, however, whether we can glean useful insights into tax compliance by moving beyond the social sciences. In particular, the literature pays little attention to the relevance of biology. This paper attempts to remedy this shortcoming by examining the potential opportunities and limitations of introducing biological concepts into tax compliance research.
    Keywords: tax compliance; tax morale; tax evasion; biology; genetics
    JEL: H26 B40 B52 C63 D03 Z19
    Date: 2014–03
  7. By: Doerrenberg, Philipp (University of Cologne); Duncan, Denvil (Indiana University)
    Abstract: This paper studies the effect of tax evasion on the economic incidence of sales taxes. We design a laboratory experiment in which buyers and sellers trade a fictitious good in double auction markets. A per-unit tax is imposed on sellers, and sellers in the treatment group are provided the opportunity to evade the tax whereas sellers in the control group are not. We find that the market equilibrium price in the treatment group is economically and statistically lower than in the control group. This result is consistent with a theoretical model in which access to evasion opportunities reduces the effective tax rate and therefore dampens real behavioral responses. Our findings suggest that the benefits of tax evasion are not limited to the side of the market with access to evasion but are partly shifted to the non-evading side of the market. We discuss the implications of our findings for the distributional and welfare effects of taxes.
    Keywords: tax evasion, tax incidence, double auction
    JEL: H21 H22 H26 H3 D44
    Date: 2014–04
  8. By: Vincenzo Visco
    Date: 2014–03
  9. By: Chaudhuri, Sarbajit; Dwibedi, Jayanta
    Abstract: The paper shows that the policy of forging a vertical linkage between the formal and informal credit markets is distinctly superior to the existing credit policy of horizontally substituting the informal sector by the formal one. An inflow of subsidized formal credit to the informal lenders not only ensures better terms of borrowing to the small borrowers but also leads to higher agricultural productivity vis-à-vis the horizontal linkage case. Even if the informal sector lenders are allowed to collude, the informal interest rate is still lower in the vertical linkage case.
    Keywords: Formal credit, informal credit, horizontal linkage, vertical linkage, moneylender, collusion.
    JEL: D89 O1 O17 Q1 Q14
    Date: 2014–05–01
  10. By: He , Qing (BOFIT); Xue, Chang (BOFIT); Zhu, Chenqi (BOFIT)
    Abstract: The paper investigates the influences of financial development on patterns of industrial specialization across China’s regions. We find that industrial sectors reliant on access to external finance are found to concentrate in regions with developed financial markets. Both foreign direct investment (FDI) and informal financing channels are shown to play significant roles in shaping patterns of industrial specialization in China. In contrast, proxies for formal financial markets, e.g. the banking system and capital markets have few effects on regional industrial agglomeration. The role of financial development remains robust to instrumental variable estimation and controlling for other traditional determinants of regional specialization.
    Keywords: financial development; informal finance; FDI; industrial specialization
    JEL: G10 G20 L60
    Date: 2014–04–11
  11. By: Fernando Jaramillo; Monica Gomez; Andres Garcia
    Abstract: Resumen: El presente trabajo estudia el efecto de la política fiscal sobre el empleo y la producción de los sectores formales e informales. En particular, se estudia cuáles tipos de impuestos son más eficientes para financiar el gasto público, en el contexto de una economía con un sector informal importante. El modelo puede ser usado para evaluar el efecto de políticas fiscales tendientes a reducir el tamaño del sector informal, como la recientemente adoptada en Colombia. En este artículo se presenta un modelo dinámico con acumulación de capital y presencia del sector informal, con el fin de cuantificar el efecto de cambios en la política fiscal en un país con un sector informal importante, como Colombia. Para esto, se le introduce desempleo e informalidad a un modelo dinámico de crecimiento a la Ramsey-Cass-Koopmans con impuestos al consumo, al trabajo y al capital. A partir de esta estructura se construye un modelo Dinámico Estocástico de Equilibrio General (DSGE por su siglas en inglés) con fricciones en el mercado de trabajo a la Mortensen y Pissarides (1994) y con dos sectores productivos: el formal y el informal. Los resultados de los ejercicios confirman los resultados encontrados por Stiglitz en un modelo estático, en el sentido que el impuesto al consumo no necesariamente es más eficiente que otros impuestos que en la literatura tradicional son distorsionantes.
    Date: 2013–08–01
  12. By: Ana Luiza Neves de Holanda Barbosa; Carlos Henrique L. Corseuil
    Abstract: O objetivo deste texto é investigar o impacto do Programa Bolsa Família (PBF) na composição do mercado de trabalho no Brasil. Em particular, analisar em que medida essa transferência de renda distorce a escolha ocupacional dos beneficiários no sentido de torná-los mais propensos a optar por uma ocupação informal. Para tanto, utilizou-se o arcabouço de regressão descontínua (fuzzy RDD), ao explorar-se uma descontinuidade presente na regra de elegibilidade do programa, que vem a ser um limite para a idade das crianças. A análise é feita com base nos microdados da Pesquisa Nacional por Amostra de Domicílios (PNAD) de 2006, do Instituto Brasileiro de Geografia e Estatística (IBGE). Os resultados encontrados sugerem que o programa não tem impactos sobre a escolha ocupacional dos beneficiários entre os postos formais e informais. This study analyzes the impact of conditional cash transfer program Bolsa Familia in the occupational composition Brazilian labor market. The methodology relies on a discontinuity in the program elegibility rule regarding children’s age to attain the identification of a LATE parameter. The analysis is carried out with 2006 microdata from National Household Sample Survey (PNAD/IBGE). Our results suggest the cash transfer program does not affect the occupational choice of Brazilian adults among formal and informal jobs.
    Date: 2014–04

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