nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2015‒01‒26
eight papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Determinants of Transitions across Formal/Informal sectors in Egypt By Tansel, Aysit; Ozdemir, Zeynel / A.
  2. Generating Larger Tax Revenue in South Asia By Gupta, Poonam
  3. Challenges and Opportunities of India's Manufacturing Sector By Isabelle Joumard; Urban Sila; Hermes Morgavi
  4. A wind of change? Reforms of Tax Systems since the launch of Europe 2020 By Gaëlle Garnier; Endre György; Kees Heineken; Milena Mathé; Laura Puglisi; Savino Rua; Agnieszka Skonieczna; Astrid Van Mierlo
  5. A Democratic Rentier State? Taxation, Aid Dependency, and Political Representation in Benin By Giulia Piccolino
  6. Why Do SMEs Not Borrow More from Banks? Evidence from the People's Republic of China and Southeast Asia By Wignaraja, Ganeshan; Jinjarak, Yothin
  7. Moving towards a single labour contract: pros, cons and mixed feelings By Etienne Wasmer; Nicolas Lepage-Saucier; Juliette Schleich
  8. Incorporation de Nouvelles Variables dans le Modèle Mincerian dans un Contexte de Marché du Travail Segmenté : Application aux Données de la Tunisie By Dhaoui, Elwardi

  1. By: Tansel, Aysit; Ozdemir, Zeynel / A.
    Abstract: Informality is a salient feature of labor market in Egypt as it is the case with many developing countries. This is the first study of the determinants of worker transitions between various labor market states using panel data from Egypt. We first provide a diagnosis of dynamic worker flows across different labor market states. We develop transition probabilities by gender across different labor market states utilizing Markov transition processes. Next we identify the effects of individual, household, job characteristics and location on different mobility patterns by estimating a multinomial logit regression. The results point to the highly static nature of the Egyptian labor market. Government employment and the out of labor force are the most persistent labor market states. Further, only a few of the explanatory variables except high levels of education are found to have predictive power in explaining the transitions from formal wage, informal wage, self-employment, unemployment government employment and out of labor market states.
    Keywords: Labor market dynamics, informality, Markov processes, multinomial logit, Egypt
    JEL: J21 J24 J6
    Date: 2014–11–15
  2. By: Gupta, Poonam
    Abstract: Despite repeated attempts, South Asian countries have managed only limited and sporadic success in mobilizing larger tax revenue. Tax-to-GDP ratios in most countries in the region remain below cross country averages and are considered inadequate to meet their financing needs. Underperformance in tax revenue generation does not seem due to paucity of tax policy reforms. South Asian countries have undertaken considerable reforms in the last decade, and their tax structures have converged with the rest of the world. But they have been less successful in widening their tax base, in strengthening tax administration, and in improving compliance. Additionally, structural factors such as large share of agriculture, low literacy, and large informal sectors have hindered tax collection. Further efforts in the region to increase tax revenue ought to be wider in scope than before and should extend to the subnational and local governments. They should focus on simplifying tax systems, strengthening tax administration, and broadening the tax base. These efforts should be situated within a wider reform program that aims to strengthen governance, improve business environment and help formalize their economies.
    Keywords: South Asia, Tax Revenue, Tax Policy
    JEL: H2 H24 H26 H6
    Date: 2015–01
  3. By: Isabelle Joumard; Urban Sila; Hermes Morgavi
    Abstract: The manufacturing sector has contributed little to income growth and its share in total merchandise exports has been declining. Manufacturing has not brought much new employment, and most of the recent rise in manufacturing employment has been in the informal sector, where workers are not covered by social security arrangements.<P> Productivity of the manufacturing sector is low, partly because the relatively small size of manufacturing firms makes it difficult to exploit economies of scale. Despite abundant, low-skilled and relatively cheap labour, Indian manufacturing is surprisingly capital and skill intensive. Furthermore, firms have little incentive to grow, since by staying small they can avoid taxes and complex labour regulations. Land acquisition is slow, companies face frequent power outages and transport infrastructure is below par. This is especially harmful as manufacturing is highly reliant on well-functioning infrastructure.<P> Stronger manufacturing would increase productivity and make growth more inclusive, while contributing to improved current account balance. In particular, India should aim for more formal jobs, as these tend to be the most secure and of highest productivity.<P>Défis et opportunités pour le secteur manufacturier en Inde<BR>Le secteur manufacturier ne contribue guère à l’accroissement du revenu et sa part dans les exportations totales de marchandises diminue, les services étant le premier moteur de la croissance économique. Le secteur crée peu d’emplois et la hausse récente de l’emploi dans la production manufacturière s’est réalisée pour l’essentiel dans le secteur informel, là où les travailleurs ne bénéficient pas de couverture sociale. La productivité du secteur manufacturier est faible, en partie parce que la taille relativement modeste des entreprises du secteur ne facilite pas les économies d’échelle. En dépit d’une main-d’oeuvre abondante, peu qualifiée et relativement bon marché, l’intensité en capital et en emplois qualifiés du secteur manufacturier indien est d’un niveau étonnamment élevé. De surcroît, les entreprises ne sont guère incitées à recruter et à accroître leurs effectifs car en restant de taille modeste, elles évitent les obligations fiscales et une réglementation complexe du travail. Les procédures d’acquisition de terains sont longues, les entreprises sont confrontées à de fréquentes coupures d’électricité et les infrastructures de transport laissent à désirer. Ces facteurs sont d’autant plus dommageables que la production manufacturière est fortement tributaire d’infrastructures qui fonctionnent. Un secteur manufacturier plus solide permettrait de rehausser la productivité et de rendre la croissance plus inclusive, tout en contribuant à améliorer la balance courante. En particulier, il faudrait que l’Inde vise à créer plus d’emplois formels car ceux-ci offrent généralement le plus de sécurité et sont plus productifs.
    Keywords: taxes, productivity, education, firm size, informality, trade facilitation, manufacturing, employment, land acquisition, infrastructure, India, labour regulation, business environment, acquisition du terrain, emploi, taille des entreprises, réglementation du travail, secteur manufacturier, infrastructure, Inde, productivité, fiscalité
    JEL: J2 J24 K2 L25 L26
    Date: 2015–01–08
  4. By: Gaëlle Garnier (European Commission); Endre György (European Commission); Kees Heineken (European Commission); Milena Mathé (European Commission); Laura Puglisi; Savino Rua (European Commission); Agnieszka Skonieczna (European Commission); Astrid Van Mierlo (European Commission)
    Abstract: This paper reviews the tax reforms implemented by EU Member States since the adoption of the first country-specific recommendations in the framework of the Europe 2020 strategy. Even though there is a need for more action, as evidenced by the number of tax recommendations, overall many Member States have put in place reforms that follow the logic of the EU policy recommendations in most priority areas. A large number of Member States have recently introduced targeted reductions in the tax burden on labour and have shifted the tax burden towards less detrimental tax bases, although these changes have been of a limited magnitude. Tax incentives to support research and development have grown in importance, and have contributed to sustaining R&D investment during the crisis. Regarding private debt, which was one of the roots of the crisis, several Member States have taken measures to reduce the debt bias in their tax system. Almost half of the Member States have shifted some of the tax burden to recurrent immovable property taxes, even if significant increases were only observed in a few countries. Finally, many Member States have worked on strengthening tax compliance with some of them reporting tangible financial results. However, progress has been more limited in relation to environmental tax reforms and VAT.
    Keywords: European Union; European Semester; taxation, tax policy; VAT; fraud; corporate taxation; personal income taxation; environment; research and development; compliance
    JEL: H11 H20 H24 H25 H26 H27 H87
    Date: 2014–11
  5. By: Giulia Piccolino (GIGA German Institute of Global and Area Studies)
    Abstract: Drawing on the history of statebuilding in Western Europe, fiscal sociology has proposed the existence of a mutually reinforcing effect between the emergence of representative government and effective taxation. This paper looks at the case of Benin, a low-income West African country that underwent a fairly successful democratization process in the early 1990s. It finds, in contrast to previous studies that have emphasized dependency on aid rents, that Benin appears to have reinforced its extractive capacities since democratization. However, the effect of democratization has been largely indirect, while other factors, such as the influence of the International Financial Institutions (IFIs) and the size of the country’s informal sector, have played a more direct role in encouraging or inhibiting tax extraction. Nevertheless, the hypothesis that effective taxation depends on a quasiconsensual relationship between government and taxpayers finds some confirmation in the Beninese case.
    Keywords: Benin, taxation, rentier state, fiscal sociology, statebuilding, democracy, de-mocratization
    Date: 2014–09
  6. By: Wignaraja, Ganeshan (Asian Development Bank Institute); Jinjarak, Yothin (Asian Development Bank Institute)
    Abstract: This study examines the relationship between firm characteristics and borrowing from commercial banks by small and medium-sized enterprises (SMEs) in the People's Republic of China (PRC) and five Southeast Asian economies (Indonesia, Malaysia, the Philippines, Thailand, and Viet Nam). Analysis of microdata from enterprise surveys highlights key aspects of SME finance since the global financial crisis, including sources of credit, lender types, and collateral types. First, SMEs typically resort to internal sources rather than external finance (including borrowing from banks) and trade credit. Second, when it comes to external finance, SMEs typically use informal non-bank credit sources more than banks. Third, there is a positive and significant association between bank borrowing and certain characteristics of SMEs, notably financial audits, firm age, and export participation. Fourth, personal assets of SME owners tend to matter more as collateral for SME borrowing from banks than other collateral types. Improving credit guarantee systems, enhancing monitoring and credit scoring by banks, and widening the scope of collateral are possible ways to facilitate increased bank borrowing by SMEs.
    Keywords: credit access; firm-level survey; collateral; credit guarantees; smes
    JEL: D22 E44 F14 L16 O14
    Date: 2015–01–13
  7. By: Etienne Wasmer (Département d'économie); Nicolas Lepage-Saucier (Département des sciences économiques (UQAM)); Juliette Schleich
    Abstract: Ce texte discute des avantages et des inconvénients du “contrat de travail unique”. Après une discussion du dualisme et des réformes récentes du marché du travail en Europe, nous décrivons les différentes propositions visant à éliminer le dualisme. Nous soulignons ensuite les coûts du dualisme et tentons de comprendre si la création d’un contrat unique les supprimerait. Nous introduisons notamment une distinction entre les réformes basées sur un contrat unique à droits progressifs (CUDP, ou CPSR pour l’acronyme anglais), ou sur un contrat avec une période d’essai allongée (CPEA ou CLPP pour l’acronyme en anglais). Les gains et les coûts sont très différents selon l’hypothèse retenue, en particulier par rapport aux effets de stigmatisation des travailleurs et par rapport à la persistence du dualisme. Nous envisageons aussi d’autres réformes: outre celle de l’introduction d’un contrat unique, nous discutons de différentes réformes indépendantes du contrat de travail mais modifiant les conséquences du dualisme du marché du travail (accès à la formation, au marché du crédit, au logement) et en comparons les coûts et avantages. Nous élaborons ensuite un simple modèle où les contrats permanents et temporaires sont tous deux à disposition des entreprises et coexistent en leur sein. Nous utilisons cette structure théorique pour décrire la demande de contrats temporaires et les conséquences potentielles d’en supprimer l’usage. Nous en concluons : premièrement, que la protection de l’emploi a un impact négatif mais modéré sur l’emploi total, qui est précisément atténué par l’existence de contrats temporaires; deuxièmement, que l’élimination des contrats temporaires diminue l’emploi total (de 7 points de pourcentage selon notre modèle); pour anihiler cet effet négatif, il faudrait une réforme radicale des contrats permanents (qui dans le cas d’espèce diminuerait des deux tiers les coûts des licenciements associés aux contrats permanents); enfin, la coexistence de contrats temporaires et permanents peut aussi avoir des conséquences négatives au niveau des normes sociales au sein de l’entreprise et sur la motivation des salariés; éliminer les contrats temporaires serait alors une amélioration de la productivité des entreprises. Nous concluons sur le fait que si les coûts du dualisme sont réels, ils sont moins évidents et moins bien démontrés que ceux engendrés par la protection de l’emploi elle-même. De plus, le contrat unique pourrait être en partie un quiproquo. Il serait au contraire utile de clarifier les objectifs fondamentaux des réformes du marché du travail.
    Keywords: contrat unique; single contract; marché du travail; labor market
    Date: 2013–02
  8. By: Dhaoui, Elwardi
    Abstract: At the micro level, economists seek to understand and interpret the decision making process of individuals for investment in human capital, as well as the many factors that can influence this process. On the other hand, the economics of education is concerned with the impacts of individual choices on trends in the labor market. This paper try to find an implementation of a new estimate of the rate of return to education with the incorporation of new variables in the Mincerian model in the context of segmented labor market applied to the case of Tunisia. This study was supported by a questionnaire with one hundred individuals of the Tunisian workforce that was developed during the months of January and February 2012.
    Keywords: Level of education; Income; Formal sector; Informal sector; Rate of return to education; Earnings
    JEL: J31 J45
    Date: 2015–01–13

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