nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2014‒06‒28
eleven papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Tax Collection, The Informal Sector, and Productivity By Julio C. Leal-Ordoñez
  2. Corruption and Firm Tax Evasion By James Alm; Jorge Martinez-Vazquez; Chandler McClellan
  3. Teaching the Economics of Income Tax Evasion By Cebula, Richard; Foley, Maggie
  4. New financial development indicators: with a critical contribution to inequality empirics By Asongu, Simplice
  5. Access to Credit: Awareness and Use of Formal and Informal Credit Institutions By Alejandra Campero; Karen Kaiser  
  6. Determinants of financial inclusion in Mexico based on the 2012 National Financial Inclusion Survey (ENIF) By Ximena Pena; Carmen Hoyo; David Tuesta
  7. The Bitcoin Question: Currency versus Trust-less Transfer Technology By Adrian Blundell-Wignall
  8. Saving More to Borrow Less: Experimental Evidence from Access to Formal Savings Accounts in Chile By Felipe Kast; Dina Pomeranz
  9. Determinantes de la inclusion financiera en Mexico a partir de la ENIF 2012 By Ximena Pena; Carmen Hoyo; David Tuesta
  10. Los trabajadores escondidos: método de inclusión de la ocupación faltante en las mediciones del Producto Bruto Geográfico de General Pueyrredon By Atucha, Ana Julia; Labrunée, María Eugenia
  11. Salidas no documentadas y facturas apócrifas By Martin, María José

  1. By: Julio C. Leal-Ordoñez
    Abstract: Some authors argue that informality is associated with distorted firm decisions and inefficiency. In this paper, I assess the quantitative effect of incomplete tax enforcement on aggregate output and productivity using a dynamic general equilibrium framework. I calibrate the model using data for Mexico and investigate the effects of introducing enforcement improvements. Under complete enforcement, labor productivity and output would be 19% higher under perfect competition and 34% higher under monopolistic competition. The source of this gain is the removal of distortions induced by incomplete enforcement of taxes which affect the economy in three ways: by reducing the capital-labor ratios of informal establishments; by allowing low-productive entrepreneurs to enter; and by misallocating resources towards low-productive establishments. I isolate the effects of pure factor misallocation, distorted occupational choices, capital accumulation, and complementarities.
    Keywords: Tax enforcement, TFP, the informal sector
    JEL: E23 E26 O17 O40
    Date: 2013–12
  2. By: James Alm (Department of Economics, Tulane University); Jorge Martinez-Vazquez (International Center for Public Policy. Andrew Young School of Policy Studies, Georgia State University); Chandler McClellan (Georgia State University)
    Abstract: Although corruption and tax evasion are distinct and separate problems, they can easily become intertwined and reinforcing. A society that is more corrupt may enable more tax evasion as corrupt officials seek more income via bribes; conversely, higher levels of tax evasion may drive corruption by offering more opportunities for bribes. While a large body of work on each subject separately has emerged, the relationship between the two problems has remained a largely unexplored area. In particular, there is no theoretical work that examines the relationship between corruption and firm tax evasion, focusing on how the potential for bribery of tax officials affects a firm’s tax evasion decisions, and there is no empirical work that examines these linkages. This paper develops a theoretical model that incorporates the potential for bribery in a firm’s tax reporting decisions, and then tests the main results of the theory using firm level information on reporting obtained from the World Enterprise Survey and the Business Environment and Enterprise Performance Survey. Estimation methods include both instrumental variable methods and propensity score matching methods, and also control for potential endogeneity of evasion and corruption. Results demonstrate that it is corruption that largely drives higher levels of evasion; that is, corruption of tax officials is a statistically and economically significant determinant of tax evasion. Tax inspectors who request bribes result in reduction of sales reported for taxes of between 4 and 10 percentage points. Additionally, larger bribes result in higher levels of evasion, at least up to some point. These results indicate that governments seeking to increase their tax revenues must work first to ensure an honest tax administration.
    Keywords: Tax compliance; corruption.
    Date: 2014–05–22
  3. By: Cebula, Richard; Foley, Maggie
    Abstract: The purpose of this pedagogical study is to provide a straightforward and easily understood framework that can be used to teach the economic behavior underlying income tax evasion. We begin with presenting a brief background that reflects the research that had been done, especially for the case of the United States, on income tax evasion. This brief section is meant to provide the student with some overall perspective on the issue. Once this literature overview is completed, the main section of this study provides a framework, based in cost-benefit analysis, to enable the student to easily understand factors underlying personal income tax evasion.
    Keywords: underground economy; income tax evasion; pedagogy
    JEL: D14 D73 D78 E26 H24 H26 M42
    Date: 2013–03–10
  4. By: Asongu, Simplice
    Abstract: The employment of financial development indicators without due consideration to country/regional specific financial development realities remains an issue of substantial policy relevance. Financial depth in the perspective of money supply is not equal to liquid liabilities in every development context. This paper introduces complementary indicators to the existing Financial Development and Structure Database (FDSD). Dynamic panel system GMM estimations are applied. Different specifications, non-overlapping intervals and control variables are used to check the consistency of estimated coefficients. Our results suggest that from an absolute standpoint (GDP base measures), all financial sectors are pro-poor. However, three interesting findings are drawn from measures of sector importance. (1) The expansion of the formal financial sector to the detriment of other financial sectors has a disequalizing income effect. (2) Growth of informal and semi-formal financial sectors at the expense of the formal financial sector has an income equalizing effect. (3) The positive income redistributive effect of semi-formal finance in financial sector competition is higher than the corresponding impact of informal finance. It unites two streams of research by contributing at the same time to the macroeconomic literature on measuring financial development and responding to the growing field of economic development by means of informal financial sector promotion and microfinance. The paper suggests a practicable way to disentangle the effects of the various financial sectors on economic development. The equation of financial depth in the perspective of money supply to liquid liabilities has put on the margin the burgeoning informal financial sector in developing countries. The phenomenon of mobile banking is such an example.
    Keywords: Financial Development; Shadow Economy; Poverty; Inequality; Africa
    JEL: E00 G20 I30 O17 O55
    Date: 2013–09–15
  5. By: Alejandra Campero; Karen Kaiser  
    Abstract: In this paper we study the determinants of use of formal and informal credit sources. Given that awareness is a necessary step towards use of credit, in order to control for the possible selection bias we decompose the decision to use credit as a two stage decision process in which first, households form their choice set by deciding which type of institutions they want to consider as possible lenders (awareness), and then choose among them (use). Additionally, we allow for correlation between being aware of a specific source of credit and using it. We find evidence that supports the hypothesis that the formal and informal credit markets in Mexico attend different segments of the population. However, our results also show that informal lending sources' characteristics are valued per-se by consumers in certain situations, such as emergencies.
    Keywords: Credit demand, consideration set, informal credit, formal credit, Mexico
    JEL: D1 D14 G2
    Date: 2013–06
  6. By: Ximena Pena; Carmen Hoyo; David Tuesta
    Abstract: Even though 97% of the population in Mexico has at least one access point into the financial system, only 38% has some sort of saving or credit product in a formal financial institution. These figures show the insufficient use of the formal financial system and highlight the importance of analysing the determinant factors for financial inclusion in Mexico in more depth. This paper explores the factors determining financial inclusion in Mexico from the demand side, based on information from the 2012 National Financial Inclusion Survey (ENIF in the Spanish acronym). In order to identify the relevant factors, we have built financial inclusion indicators using the multiple correspondences method of analysis, taking into account whether people have credit and savings products, whether jointly (Aggregate Indicator) or individually (Savings Indicator and Credit Indicator). Using a non-linear regression analysis we endeavour to explain the factors influencing financial inclusion, bearing in mind not only whether people are banked, but also the possession of a set of formal financial products. In addition, we carry out the same analysis for the sub-group in the informal labour market, the sector of the population which generally suffers most financial exclusion. The results obtained for a range of financial inclusion indicators, both for the total population and for workers in informal sectors, show the need for making detailed analyses in order to encourage more participation in the formal financial system, by designing specific public policies for each population group depending on their socio-economic circumstances and geographical location.
    Keywords: Financial Inclusion, Personal finance, Financial institutions
    JEL: G21 G23 G28 O16
    Date: 2014–06
  7. By: Adrian Blundell-Wignall
    Abstract: The financial crisis has led to a widespread loss of trust in financial intermediaries of all kinds, perhaps helping to open the way towards the general acceptance of alternative technologies. This paper briefly summarises the crypto-currency phenomenon, separating the ‘currency’ issues from the potential technology benefits. With respect to crypto currencies, the paper argues that these can’t undermine the ability of central banks to conduct monetary policy. They do, however, raise consumer protection and bank secrecy issues. The valuation of Bitcoins and price volatility issues are discussed, as well as electronic theft, contract failures, etc., all of which could result in large losses to users and hence ultimate costs to the taxpayer (e.g. the failure to provide adequate private pensions resulting in increased reliance on public pensions). The anonymity features of the crypto-currencies also facilitate tax evasion and money laundering, both of which are major public policy concerns. The technology associated with crypto-currencies, on the other hand, could ultimately shift the entire basis of trust involved in any financial transaction. It is an innovation that creates the ability to carry out transactions without the need for a trusted third party; i.e. a move towards trust-less transactions. This mechanism could work to eliminate the role of many intermediaries, thereby reducing transactions costs by introducing much needed competition to incumbent firms. The generic issues that policy makers need to examine are summarised.
    Keywords: monetary policy, intermediaries, plenary powers, Bitcoin, Gold standard, trust-less transaction, payment technology, legal tender
    JEL: E5 F39 G19 G2
    Date: 2014–06–16
  8. By: Felipe Kast; Dina Pomeranz
    Abstract: Poverty is often characterized not only by low and unstable income, but also by heavy debt burdens. We find that reducing barriers to saving through access to free savings accounts decreases participants' short-term debt by about 20%. In addition, participants who experience an economic shock have less need to reduce consumption, and subjective well-being improves significantly. Precautionary savings and credit therefore act as substitutes in providing self-insurance, and participants prefer borrowing less when a free formal savings account is available. Take-up patterns suggest that requests by others for participants to share their resources may be a key obstacle to saving.
    JEL: D14 D91 G22 O16
    Date: 2014–06
  9. By: Ximena Pena; Carmen Hoyo; David Tuesta
    Abstract: A pesar de que el 97% de la poblacion en Mexico cuenta con al menos un punto de acceso al sistema financiero, solo el 38% tiene algun producto de ahorro o de cedito en instituciones financieras formales. Dichos resultados evidencian la falta de uso del sistema financiero formal y resaltan la importancia de analizar con mayor profundidad cuales son los factores determinantes de la inclusion financiera en Mexico. El presente trabajo explora los factores que determinan la inclusion financiera en Mexico desde el lado de la demanda, con base en la informacion de la Encuesta Nacional de Inclusion Financiera 2012 (ENIF). Para identificar los factores relevantes, se construyen indicadores de inclusion financiera mediante el metodo de analisis de correspondencias multiples, tomando en cuenta la tenencia de productos de crrdito y de ahorro, tanto de manera conjunta (Indicador Agregado) como de forma individual (Indicador de Ahorro e Indicador de Credito). De tal forma, a traves de un analisis de regresion no lineal se pretende explicar los factores que influyen en la inclusion financiera, considerando no solamente la bancarizacion, sino la tenencia conjunta de productos financieros formales. Adicionalmente, se realiza el mismo analisis para el subgrupo de poblacion que pertenece al mercado laboral informal, sector de la poblacion que generalmente sufre mas exclusion financiera. Los resultados obtenidos para los diferentes tipos de indicadores de inclusión financiera , tanto en la poblacion total como en los trabajadores informales, muestran la necesidad de realizar analisis detallados para fomentar una mayor participacion en el sistema financiero formal, disenando politicas publicas especificas para cada grupo de poblacion acorde con sus caracteristicas socioeconomicas y de ubicacion geografica.
    Keywords: Inclusion financiera, Instituciones financieras, Finanzas personales
    JEL: G21 G23 G28 O16
    Date: 2014–06
  10. By: Atucha, Ana Julia; Labrunée, María Eugenia
    Abstract: La necesidad de contar con información sobre las características productivas y laborales de la región a partir de estimaciones de indicadores generados localmente fundamentó que sean reanudadas las estimaciones del Producto Bruto Geográfico -PBG- en el Municipio de General Pueyrredón. El estudio obtuvo el nuevo año base 2004 e incluye mediciones de la Economía No Observada (ENO) con el objetivo de mejorar la captación de las actividades económicas y de ese modo, ofrecer una imagen más ajustada de la economía local. El objetivo de este escrito es presentar el método utilizado en las estimaciones del PBG para la incorporación de la ocupación faltante. Se describen con ese fin, desde la óptica de las Cuentas Nacionales, las principales definiciones operativas y formas de medición de la Economía No Observada propuesta por los organismos internacionales pertinentes, y el método adoptado a nivel local, denominado método italiano. Los principales resultados hallados, medidos en términos de cantidad de ocupados y valor agregado, indican que se incluyeron más de 77 mil trabajadores al PBG local, quienes en promedio, incorporaron un 67 porciento adicional de valor agregado, sin sumar las estimaciones de los servicios propios de las vivienda y el servicio doméstico, las cuales también son consideradas parte de la ENO.
    Keywords: Economía Sumergida; Medición; Producto Bruto Geográfico; Partido de General Pueyrredon
    Date: 2013
  11. By: Martin, María José
    Abstract: En el presente trabajo analizaremos el instituto de salidas no documentadas reglado en los arts. 37 y 38 y normas concordantes de la Ley 20.628 de impuesto a las ganancias, en relación a su naturaleza jurídica, procedencia del cómputo de gastos, posibilidad de deducción de créditos fiscales, la viabilidad de su aplicación al caso de comprobantes apócrifos o incompletos, los pronunciamientos judiciales relacionados y las consecuencias en el ámbito penal.
    Keywords: Salidas no Documentadas; Facturación; Evasión Tributaria
    Date: 2013–08

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