nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2014‒08‒16
six papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Does the marginal tax rate affect activity in the informal sector? By Søren Leth-Petersen; Peer Ebbesen Skov
  2. Mindsets, Trends, and the Informal Economy By Kanbur, Ravi
  3. Threshold, Informality, and Partitions of Compliance By Kanbur, Ravi; Keen, Michael
  4. Defining and measuring informality in the Turkish labor market By Elif Oznur Acar; Aysit Tansel
  5. Employment, unemployment, and underemployment in Africa By Golub, Stephen; Hayat, Faraz
  6. Reflections on the new compliance landscape By Baxter, Thomas C.

  1. By: Søren Leth-Petersen (Department of Economics, University of Copenhagen); Peer Ebbesen Skov (Department of Economics, University of Copenhagen)
    Abstract: This paper measures the effect of changing the marginal tax rate on earned income on the supply of labor to the informal sector with the purpose of evading taxation. Unlike any previous study, we do this by directly measuring the effect of a Danish 2010 tax reform that changed the marginal rate of taxation of earned income from 63 percent to 56 percent. The analysis is based on longitudinal survey data collected over the period 2009–2012. In each survey round we asked people about their activity in the informal sector. The effect of the tax reform on informal sector activity is measured by comparing the evolution of informal sector activity from 2009 to 2012 for people who in 2009 paid the middle and top rate of tax with people who did not. We find that there is no connection between the marginal tax rate and the supply of labor to the informal sector. As part of the survey we asked people about their perceived marginal net-of-tax income, and we show that the survey participants did not change their perception of their marginal net-of-tax income from before to after the reform. This suggests that the respondents in our survey were not aware of the implications of the reform. We also investigate the effect of the introduction of a tax deduction for the purchase of selected services on the supply of labor to the informal sector. Here again we are unable to detect any effect. Overall, our results indicate the changing the after-tax price of services is not an effective way of reducing undeclared work.
    Date: 2014–05
  2. By: Kanbur, Ravi
    Keywords: Production Economics, Research and Development/Tech Change/Emerging Technologies,
    Date: 2014
  3. By: Kanbur, Ravi; Keen, Michael
    Keywords: Production Economics, Research and Development/Tech Change/Emerging Technologies,
    Date: 2014
  4. By: Elif Oznur Acar (Department of Banking and Finance, Cankaya University); Aysit Tansel (Department of Economics, METU; Institute for the Study of Labor (IZA) Bonn, Germany; Economic Research Forum (ERF) Cairo, Egypt)
    Abstract: This paper investigates how informality can be defined and measured in the Turkish labor market. Two alternative definitions of informality are used to explore their relevance and implications for the Turkish labor market using descriptive statistics. They are the enterprise definition and the social security definition. Further, contributions of individual and job characteristics to the likelihood of informality are investigated using multivariate probit analysis under the two definitions. The social security registration criterion is found to be a better measure of informality in the Turkish labor market given its ability to capture the key relationships between several individual and employment characteristics and the likelihood of informality. The study suggests that preference should be given to social security definition of labor informality for a more accurate depiction of the Turkish labor market. The suitability of the two alternative definitions of informality in the Turkish labor market and its implications have not been investigated before.
    Keywords: Informality, Definition, Measurement and Likelihood, Turkey.
    JEL: J20 J21 J24 O17
    Date: 2014–08
  5. By: Golub, Stephen; Hayat, Faraz
    Abstract: This paper documents and analyses the predominance of informal employment in Africa and shows that lack of demand for labour rather than worker characteristics is the main reason for pervasive underemployment. Integration into the global economy and expor
    Keywords: employment, unemployment, underemployment, Africa, labour market, wages
    Date: 2014
  6. By: Baxter, Thomas C. (Federal Reserve Bank of New York)
    Abstract: Remarks at “The New Compliance Landscape: Increasing Roles – Increasing Risks” Conference, New York City.
    Keywords: economic sanction; tax evasion; foreign corrupt practices; organizational culture; employee behavior; BNPP; culture of compliance; Credit Suisse: UBS; FCPA; value systems
    JEL: D73 F51 H26 L2
    Date: 2014–07–23

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