nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2015‒02‒28
thirteen papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Agglomeration effects of informal sector: evidence from Cambodia By Tanaka, Kiyoyasu ; Hashiguchi, Yoshihiro
  2. Measuring the effect of informal work and domestic activities on poverty and income inequality in Turkey. By Armagan Tuna Aktuna-Gunes
  3. Domestic activity patterns pertaining to households and informality in Turkey. By Armagan Tuna Aktuna-Gunes
  4. Short-term impacts of formalization assistance and a bank information session on business registration and access to finance in Malawi By Campos, Francisco ; Goldstein, Markus ; McKenzie, David
  5. Tax Rates and Tax Evasion: Evidence from Missing Imports in Tanzania By Epaphra, Manamba
  6. Intelligence and Shadow Economy: a Cross-Country Empirical Assessment By Salahodjaev, Raufhon
  7. Impact of Weather Insurance on Small Scale Farmers: A Natural Experiment By Stephan Dietrich ; Marcela Ibanez
  8. Financial inclusion and its determinants: the case of Argentina By David Tuesta ; Gloria Sorensen ; Adriana Haring ; Noelia Camara
  9. Education Language Choice and Youth Entrepreneurship in Chad By Douzounet Mallaye ; Koulké Blandine Nan-Guer ; Urbain Thierry Yogo ; Eurydice Tormal Gosngar
  10. A Linkage between Firm Agglomeration and Poverty Reduction First evidence in Vietnam By Long Thanh Giang ; Cuong Viet Nguyen ; Tuyen Quang Tran
  11. Increasing Economic Opportunities of Women in the APEC By Lazo, Lucita
  12. Inclusion financiera y sus determinantes: el caso argentino By David Tuesta ; Gloria Sorensen ; Adriana Haring ; Noelia Camara
  13. Le marché du travail en République Démocratique du Congo en 2012 : principaux résultats de la phase 1 de l’enquête 1-2-3 By Grégoire Kankwanda ; Timothée Makabu Ma Nkenda ; Björn Nilsson ; François Roubaud ; Constance Torelli ; Jean-Michel Wachsberger

  1. By: Tanaka, Kiyoyasu ; Hashiguchi, Yoshihiro
    Abstract: The presence of a large informal sector in developing economies poses the question of whether informal activity produces agglomeration externalities. This paper uses data on all the nonfarm establishments and enterprises in Cambodia to estimate the impact of informal agglomeration on the regional economic performance of formal and informal firms. We develop a Bayesian approach for a spatial autoregressive model with an endogenous explanatory variable to address endogeneity and spatial dependence. We find a significantly positive effect of informal agglomeration, where informal firms gain more strongly than formal firms. Calculating the spatial marginal effects of increased agglomeration, we demonstrate that more accessible regions are more likely than less accessible regions to benefit strongly from informal agglomeration.
    Keywords: Cambodia, Informal sector, Economic conditions, Agglomeration, Bayesian
    JEL: C11 C21 H26 O17 R12 C26
    Date: 2015–02
  2. By: Armagan Tuna Aktuna-Gunes (Centre d'Economie de la Sorbonne - Paris School of Economics )
    Abstract: In this article, we propose to calculate the size of the population living in poverty, measured through uni- and multidimensional poverty indices, and the Gini coefficient using extended full (time plus money and informal earnings) incomes, from cross-sectional data covering 2003-2006 in Turkey. Thus monetary incomes are corrected by adding the earnings gathered from informal activities and the monetary values of time spent in domestic activities into declared incomes, producing an error-free estimate of the size of the population living in poverty and the Gini ratio overall. To show the effect informal activities with the domestic ones have on poverty, changes in the joint probability of being in informal activity while being considered poor is measured by means of a bivariate probit model using extended (money plus informal earnings) income and extended full incomes.
    Keywords: Informal earnings, domestic activities, poverty, Gini coefficient.
    JEL: E26 D1 I32 D63
    Date: 2015–02
  3. By: Armagan Tuna Aktuna-Gunes (Centre d'Economie de la Sorbonne - Paris School of Economics )
    Abstract: We investigate underlying determinants of informality by representing the Turkish Time Use Survey in 2006 and the Household Budget Surveys for the years from 2003 to 2006 conducted by Turkish Statistical Institute. Following the descriptive methodology proposed by Gronau and Hamermesh (2006), the main focus is to describe the household data by highlighting the main features and revealing the relative importance of expenditures of time and goods through an exaustive set of commodities and assign time and goods inputs to each in order to measure their relative goods intensities. The analysis of the evolution of commodity per time spent during 2003, 2004, 2005 and 2006 reveals the fact that the average value for total expenditures per total time spent show increases in a decreasing trend (concave shape) over these years. Supposing that the average time spent among these years in constant on average (meaning that they did not really change from one year to another), the result of this accounting support the hypotheses that the amount of consumption present in household production during these years decreased. Our findings could be used as guides to better understanding the socio-economic conditions in developing countries and to obtain more accurate measurements of the size of informality, poverty and income inequalities.
    Keywords: Domestic avtivities, time use, goods intensity, informality.
    JEL: D1 J22 E26
    Date: 2015–02
  4. By: Campos, Francisco ; Goldstein, Markus ; McKenzie, David
    Abstract: Despite regulatory efforts designed to make it easier for firms to formalize, informality remains extremely high among firms in Sub-Saharan Africa. In most of the region, business registration in a national registry is separate from tax registration. This paper provides initial results from an experiment in Malawi that randomly allocated firms into a control group and three treatment groups: a) a group offered assistance for costless business registration; b) a group offered assistance with costless business registration and (separate) tax registration; and c) a group offered assistance for costless business registration along with an information session at a bank that ended with the offer of business bank accounts. The study finds that all three treatments had extremely large impacts on business registration, with 75 percent of those offered assistance receiving a business registration certificate. The findings offer a cost-effective way of getting firms to formalize in this dimension. However, in common with other studies, information and assistance has a limited impact on tax registration. The paper measures the short-term impacts of formalization on financial access and usage. Business registration alone has no impact for either men or women on bank account usage, savings, or credit. However, the combination of formalization assistance and the bank information session results in significant impacts on having a business bank account, financial practices, savings, and use of complementary financial products.
    Keywords: Business in Development,Competitiveness and Competition Policy,Business Environment,E-Business,Access to Finance
    Date: 2015–01–01
  5. By: Epaphra, Manamba
    Abstract: Tax evasion is the basic characteristic of many developing countries. De facto tax collections are consequently far below revenue implied by published or de jure tax rates. This paper empirically examines tax rates (tariff plus VAT rates) as the determinants of customs revenue evasion across products, based on a systematic analysis of discrepancies in trade declarations for trading partners, United Republic of Tanzania, Republic of South Africa and China. The results indicate that trade gap is highly correlated with tax rates, that is, much more value is lost for products with higher tax rates. The results also show that the trade gap is correlated with tax rates on closely related products from Republic of South Africa, implying that evasion takes place through misclassification of imports from higher-taxed categories to lower-taxed ones. However, there is no evidence of misclassification of imports from China. The wide divergences between the effective and statutory tax rates in Tanzanian tax system indicate that there is a scope for raising tax revenue without increasing tax rates by reinforcing tax and customs administrations and reducing tax evasion.
    Keywords: tax evasion, imports, tariff rate, and import VAT
    JEL: H20 H26
    Date: 2015
  6. By: Salahodjaev, Raufhon
    Abstract: This paper empirically assesses the influence of intelligence on a shadow economy, using data from 158 countries, over the period 1999-2007. The results provide strong evidence for the claim that intelligence is negatively associated with an underground economy. This paper establishes that, on average, a one standard deviation increase in IQ is associated with an 8.5 percentage point reduction in a shadow economy relative to GDP. The negative effect of intelligence remains intact when controlled for conventional antecedents of a shadow economy.
    Keywords: intelligence, IQ, institutions, shadow, economy
    JEL: I2 I25
    Date: 2015–02–04
  7. By: Stephan Dietrich (Georg-August-University Göttingen ); Marcela Ibanez (Georg-August-University Göttingen )
    Abstract: This paper explores the impacts of traditional agricultural insurance that offers protection against climatic shocks on small-scale tobacco farmers in Colombia. We analyze the impacts of access to the insurance on household financial outcomes after a period of severe climatic events that caused substantial crop failures. Our identification strategy benefits from a natural experimental setup of the form in which the insurance was launched. We find that tobacco producers with access to the insurance program were less likely to acquire informal loans, were less likely to use loans to repay debts, and had access to loans with lower interest rates and longer maturation periods. Moreover, access to this program was positively associated with increased savings and accumulation of liquid assets.
    Keywords: Insurance; Credit; Natural Disasters; Risk Management; Colombia
    JEL: G22 G23 O13 O16 Q14
    Date: 2015–02–23
  8. By: David Tuesta ; Gloria Sorensen ; Adriana Haring ; Noelia Camara
    Abstract: This paper analyses the three dimensions determining financial inclusion in the case of Argentina, from a micro-economic perspective. On the supply side, formal financial services are accessed through traditional channels: branches and ATMs, with an as-yet incipient regulation for financial inclusion, unlike the situation in neighbouring countries. In terms of use, a person’s level of education, income and age are all important variables which determine whether they have financial products such as accounts, credit and debit cards, formal credit and electronic payments. Finally, the factors affecting the perception of different barriers of involuntary exclusion are: income and age.
    Keywords: Argentina, Financial Inclusion, Latin America, Research, Working Paper
    JEL: D14 G21
    Date: 2015–01
  9. By: Douzounet Mallaye ; Koulké Blandine Nan-Guer ; Urbain Thierry Yogo ; Eurydice Tormal Gosngar
    Abstract: Using the third Chadian survey on consumption and the informal sector (ECOSIT III), this study aims to assess the relationship between education language choice and entrepreneurship in Chad. By education language choice, we mean the choice between education in Arabic and education in French. Specifically, the study seeks to evaluate the effect of language of instruction on self-employment. To achieve this objective, we make use of a recursive vicariate profit model to tackle the endogeneity of education choice. Moreover, the propensity score matching approach is also used to check for the robustness of results. Three main conclusions are derived from the analysis: first, those youth who choose Arabiclanguage education are more likely to be an entrepreneur. Second, youth are more likely to be self-employed in Chad. Third, the probability to be self-employed is higher for men than women. Based on this evidence, relevant recommendations are provided to help the Chadian government and their partners to help to design appropriate policies to foster youth entrepreneurship in Chad.
    Keywords: Entrepreneurship, Language, Education, Youth, Chad
    JEL: I20 J24 L26 M13
    Date: 2015
  10. By: Long Thanh Giang ; Cuong Viet Nguyen ; Tuyen Quang Tran
    Abstract: In this paper, we examine the linkage between the firm agglomeration and welfare of local households in Vietnam. We measured the firm agglomeration by per capita firm outputs at the district level, and household welfare by per capita income, expenditure and poverty. We find that the firm agglomeration helps households move from the informal sector to the formal sector. As a result, there is a positive effect of the firm agglomeration on per capita income, per capita expenditure, and poverty reduction, albeit at a small and time-decreasing magnitude. The effect of the firm agglomeration on per capita expenditure tends to be higher for households with male, younger and more educated heads than households with female, older and less educated heads. Households who live in rural areas and do not have crop land are more likely to benefit from the firm agglomeration than those living in urban areas and having cropland.
    Keywords: agglomeration, firm performance, poverty, household survey, panel data, Vietnam.
    JEL: L11 I31 I30
    Date: 2015–02–10
  11. By: Lazo, Lucita
    Abstract: The paper argues for increasing women`s economic opportunities in the APEC region and states that women`s participation in the economy is skewed toward micro and small enterprises and they are mostly self-employed entrepreneurs in the informal economy. It summarizes the challenges commonly encountered by women entrepreneurs in the APEC economies and recommends actions to address these at the Philippine economy level and at the APEC regional level.
    Keywords: APEC, Philippines, informal economy, women, micro and small enterprises
    Date: 2015
  12. By: David Tuesta ; Gloria Sorensen ; Adriana Haring ; Noelia Camara
    Abstract: El presente estudio pretende analizar, desde un punto de vista microeconomico, las tres dimensiones que determinan la inclusion financiera para el caso de Argentina. Desde el lado de la oferta se tiene que el acceso a los servicios financieros formales se basa en los canales tradicionales: sucursales y ATMs y la regulacion para la inclusion financiera es todavia incipiente, a diferencia de lo que ocurre en paises vecinos. En lo que respecta al uso, el nivel educativo, el ingreso y la edad son variables importantes que determinan la tenencia de diferentes productos financieros como cuentas, tarjetas de credito y debito, credito formal o pagos electronicos. Finalmente, los factores que afectan a la percepcion de diferentes barreras de exclusion involuntaria son el nivel de ingreso y la edad.
    Keywords: Argentina, Documento de Trabajo, Latam, inclusion financiera, investigacion
    JEL: D14 G21
    Date: 2015–01
  13. By: Grégoire Kankwanda (Institut National de la Statistique en RDC ); Timothée Makabu Ma Nkenda (Institut National de la Statistique en RDC ); Björn Nilsson (PSL, Université Paris-Dauphine, LEDa, UMR DIAL ); François Roubaud (DIAL, IRD, Paris ); Constance Torelli (INSEE, UMR DIAL ); Jean-Michel Wachsberger (Université Lille 3, UMR DIAL )
    Abstract: (english) The second wave of the 1-2-3 survey was carried out in the Democratic Republic of Congo in 2012. It allows for important insights on basic socio-economic indicators for the first time since the first wave was carried out in 2004-2005. The present survey differs from the previous one in that a significantly larger number of households were surveyed, allowing for representativeness at the provincial level according to the new administrative division voted in the 2005 constitution. The Labour force survey, the first phase of the 1-2-3 survey, carried out in 2012 and conducted by the National Statistic Institute provides a detailed picture of the main characteristics of employment and unemployment in the country. This study, which presents the principal results of the survey, helps highlight the major structural characteristics of the urban and rural labour markets. By identifying their main shortcomings (early labour force participation for children, distortion between young people's expectations and real recruitment prospects, discrimination against women, inefficiency of placement services for the unemployed, generalisation of under-employment, the place of the informal sector, etc.), the study opens up new possibilities for defining policies designed to improve the way labour markets work in DRC. _________________________________ (français) La deuxième vague de l’enquête 1-2-3 a été réalisée à l’échelle nationale de la République démocratique du Congo en 2012 par l’Institut National de la Statistique. Elle fournit un aperçu des indicateurs socio-économiques de base depuis la réalisation de la première vague en 2004-2005. L’enquête de 2012 diffère de celle de 2004-2005 en ce qu’un nombre beaucoup plus important de ménages a été enquêté, fournissant une représentativité au niveau des 26 provinces établies selon le nouveau découpage administratif prévu dans la constitution de 2005. L’enquête emploi, première phase du dispositif d’enquête 1-2-3, donne une image détaillée des principales caractéristiques de l’activité, du chômage et des emplois dans le pays. Cette étude, qui présente les principaux résultats de l’enquête, met en évidence les faits saillants du marché du travail au niveau national. Pour affiner nos analyses, nous avons choisi deux entrées privilégiés : suivant le milieu de résidence (urbain et rural) et le genre. En mettant en lumière les défaillances les plus lourdes (mise au travail précoce des enfants, désajustements entre les attentes des jeunes et les perspectives réelles d’embauche, discrimination à l’encontre des femmes, inefficacité des services de placement des chômeurs, généralisation du sousemploi, place du secteur informel, etc.), l’analyse ouvre des pistes pour des recherches plus approfondies et pour la définition de politiques visant à améliorer le fonctionnement du marché du travail en RDC.
    Keywords: Travail, chômage, secteur informel, Afrique équatoriale, Labour, Unemployment, Informal Sector, Equatorial Africa.
    JEL: J20 J21 J22 J23 J24 J30 J31 J71 J81 J82
    Date: 2014–12

This nep-iue issue is ©2015 by Catalina Granda Carvajal. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.