nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2015‒01‒19
five papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. The Underground Economy in the U.S.A: Preliminary New Evidence on the Impact of Income Tax Rates (and Other Factors)on Aggregate Tax Evasion, 1975-2008 By Cebula, Richard
  2. Bureaucracy, Underground Activities, and Fluctuations By Soldatos, Gerasimos T.
  3. Informal Employment in Transition Countries: Empirical Evidence and Research Challenges By Lehmann, Hartmut
  4. Dual labour market in Poland – proposals for overcoming the deadlock By Piotr Arak; Piotr Lewandowski; Piotr ¯akowiecki
  5. El efecto de las pensiones sobre la desigualdad de ingresos en Colombia By Alejandro Nieto Ramos

  1. By: Cebula, Richard
    Abstract: This empirical study seeks to identify determinants of the underground economy in the U.S. in the form of aggregate federal personal income tax evasion over the period 1975-2008, with a specific focus upon the net impact of higher federal income tax rates on personal income tax evasion. In this study, we use the most recent data available on aggregate personal income tax evasion, data that are derived from the General Currency Ratio Model and measured in the form of the ratio of unreported AGI to reported AGI. Most other studies of federal income tax evasion for the U.S. do not use data this current. It is found that the impact of increases in the federal income tax rate on aggregate personal income tax evasion may, on balance, be ambiguous, possibly suggesting that the income effect is negative and outweighs the positive substitution effect for the representative taxpayer. It is also found that the degree of aggregate federal personal income tax evasion may be an increasing function of the percentage of federal personal income tax returns characterized by itemized deductions and a decreasing function of the Tax Reform Act of 1986 (during the first two years of implementation), the ratio of the tax free interest rate yield on high grade municipals to the interest rate yield on ten year Treasury notes, and higher audit rates of filed federal income tax returns (as a measure of risk from tax evasion) by IRS personnel. Finally, unpopular wars may provide a secondary benefit for and therefore act as an inducement for greater tax evasion.
    Keywords: income tax evasion; income tax rates; income effect; substitution effect
    JEL: D12 H24 H26 H31
    Date: 2013–10–27
  2. By: Soldatos, Gerasimos T.
    Abstract: This is a note on corruption and underground economy in a Kaldor-type model of the business cycle. It appears that when the economy is booming and underground activities seek to enter the official economy, bureaucrats have the upper hand but until underground businesses cannot tolerate bureaucrats anymore and start reentering the informal sector. This is what checks the growth of the official output and gets it into its downward phase. Once in this phase, bureaucrats lose control and just follow passively the developments in the economy. At the trough of the contraction, official activities reach their nadir whereas the unofficial ones are at their zenith and seek to buy whatever has been left from the staggering official businesses. This is what leads to recovery in the absence of stabilization policies.
    Keywords: Bureaucracy, Corruption, Underground Economy, Business Cycle
    JEL: D73 E32 O17
    Date: 2014
  3. By: Lehmann, Hartmut (University of Bologna)
    Abstract: Even though informal employment is wide-spread in transition economies the literature on this phenomenon in the region is rather scarce. For policy makers it is important to know the incidence and the determinants of informal employment. In the first part of the paper we demonstrate that its incidence and to a lesser degree its determinants depend on the definition used. We then discuss studies that attempt to test for labor market segmentation in transition economies along the formal-informal divide. The presented results are inconclusive and we come to the conclusion that more work needs to be done before we can make definitive statements about whether labor markets are integrated or segmented in transition economies. Last but not least we introduce a new research area that links risk preferences and selection into labor market states. We show that if individuals have a choice, relatively risk loving workers have an increased likelihood to choose informal employment and self-employment.
    Keywords: informal employment, definitions, determinants, risk preferences, transition economies
    JEL: D03 J43 P23
    Date: 2014–12
  4. By: Piotr Arak; Piotr Lewandowski (Instytut Badañ Strukturalnych); Piotr ¯akowiecki
    Abstract: The report discusses the phenomenon of dual labour market, which in Poland involves abuse of the possibility to hire employees under civil law contracts. The report also proposes solutions aimed at curbing this phenomenon. We propose introducing a so-called single contract, adapted to the Polish specificity, which would make it easier for companies to hire employees in a flexible manner, at the same time opening to employees the door to stable employment. We also call for reducing those employment-related obligations placed on small companies which are not related to protecting employees against dismissal or to their wages, but generate additional costs. Furthermore, we propose reducing the taxation of low earners who are at risk of being forced to work under civil law contracts or self-employment. This can be achieved by increasing the tax deductible expenses and raising the basic income tax rate from 18% to 20%, such change being neutral for the state budget. Our proposals are aimed at finding a nw balance between the interests of employers and the needs of workers in Poland.
    Keywords: employment, Poland, labour market duality, fixed-term contracts
    JEL: J0 J8
    Date: 2014–05
  5. By: Alejandro Nieto Ramos
    Abstract: Este artículo pretende determinar y analizar el impacto de las inequidades pensionales en la distribución del ingreso del país, específicamente, busca cuantificar la contribución de las pensiones en los actuales niveles de desigualdad. Partiendo de la descomposición del Coeficiente de Gini en diversas fuentes de ingreso, y usando la información de la Gran Encuesta Integrada de Hogares del 2012, se demuestra que las pensiones son una fuente de desigualdad debido principalmente a la baja cobertura pensional, producto de los actuales niveles de informalidad laboral y desempleo, y a los subsidios pensionales que tienden a favorecer a los trabajadores con mayores recursos.
    Keywords: pensiones, distribución del ingreso, cobertura, desigualdad, coeficiente de Gini
    JEL: D31 H55 J32
    Date: 2014–12–11

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