nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2015‒03‒27
six papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Informality: Causes, Consequences and Policy Responses By Kanbur, Ravi
  2. Self-employment and Small Workplaces in the Czech and Slovak Republics: Microeconometric Analysis of Labor Force Transitions By Pavla Nikolovova; Filip Pertold; Mario Vozar
  3. High unemployment and a segmented labour market in South Africa: A suggested macroeconomic model By Philippe Burger; Frederick Fourie
  4. Evidence on the Responsiveness of Export-Related VAT Evasion to VAT Rates in the EU By Jon Bakija; Ivan Badinski
  5. Does exchange of information between tax authorities influence multinationals' use of tax havens? By Braun, Julia; Weichenrieder, Alfons J.
  6. Fraude fiscal / Tax Fraud By Alejandro Esteller-Moré; Ignacio Mauleón; James Alm

  1. By: Kanbur, Ravi
    Abstract: A stylized prediction of the development economics discourse is that informality will disappear with development. And yet in the last twenty years conventional measures of informality, far from declining, have either remained stagnant or have actually increased. What exactly is informality and what are its magnitudes and trends? What are the causes of informality and why is it not decreasing as predicted by standard theories of development? What are the consequences for inclusive economic growth of a large and increasing informal sector? What are feasible and desirable policy responses to informality? These are the questions which motivate this broad based survey and overview of informality, with particular focus on India.
    Keywords: informal labour; informal sector; informality; informality and poverty
    JEL: O17
    Date: 2015–03
  2. By: Pavla Nikolovova (CERGE-EI); Filip Pertold (CERGE-EI); Mario Vozar (CERGE-EI)
    Abstract: In this paper we investigate the role of the business cycle for the transitions of Czech and Slovak workers to informal economy using Czech and Slovak Labor Force Survey data. We use two approximations for the participation in informal economy, self-employment and employment in small workplace (10 and fewer workers or 5 and fewer workers). Both statuses are potentially associated with the participation in an informal economy. Using the similar methodology as presented in Bosh and Maloney (2007), we show that recent recession caused substantial increase in transitions of workers from formal into both self-employment and employment. As compare to pre-recession time the flow into self- increased more than 4 times. The increase in transitions to small workplaces is less pronounced.
    Keywords: informal economy, business cycle, labor force
    JEL: J21 H26
    Date: 2014–07
  3. By: Philippe Burger (University of the Free State); Frederick Fourie (University of the Free State)
    Abstract: Few countries have as serious an unemployment problem as South Africa. In the period 2000-2013 the narrow (and official) unemployment rate averaged 24.1%. The broad unemployment rate (which includes the discouraged unemployed) averaged 33.4%. At the same time the informal sector is very small relative to total employment. If workers do not find employment in the formal sector, why do they become unemployed rather than enter the informal sector? To develop a theoretical model that incorporates both the segmented nature of the South African labour market and the simultaneous existence of very high unemployment, this paper draws on the dual labour market model of Bulow and Summers (1986) and the suggestion by Kingdon and Knight (2004) that barriers to entry exist into the informal sector. The result is a three-segment model comprising a primary (‘good jobs’) and secondary (‘bad jobs’) sector/segment, as well as a segment comprising the unemployed.
    Keywords: Unemployment; Segmented labour market; South Africa
    JEL: E24 E26 J01
    Date: 2014–10
  4. By: Jon Bakija (Williams College); Ivan Badinski (The Analysis Group)
    Abstract: In almost all countries that operate a value-added tax (VAT), the VAT “zero-rates†exports, meaning that exporting firms can claim credit for VAT on their inputs, but pay no VAT on sales of exports. This is necessary when the goal is to make the base of the tax domestic consumption. A consequence is that firms can reduce their tax burdens by misreporting some of their sales to domestic consumers as exports. In principle, reported exports from country i to country j should match up with reported imports into country j from country i, except for measurement errors, and costs of insurance and freight that are included in import value but not export value. VAT evasion can be another source of discrepancy which would tend to cause reported exports to exceed reported imports for trade flows in the same direction. We use data on such discrepancies in trade flows between pairs of European Union member countries during 1984 through 2011 to infer whether higher VAT rates are associated with greater over-reporting of exports. A difference-in-differences identification strategy, exploiting the fact that VAT rates changed in different ways over time in different countries, suggests that each percentage point increase in the exporting country’s standard VAT rate increases the discrepancy of exports over imports by about 1.1 percent of exports. For the typical EU-15 country, this implies that at the margin, about 15 percent of the static revenue gain from a VAT rate increase would be lost due to this particular channel for VAT evasion.
    Keywords: value added tax, exports, evasion
    JEL: H2 H26
    Date: 2014–11
  5. By: Braun, Julia; Weichenrieder, Alfons J.
    Abstract: Since the mid-1990s, countries offering tax systems that facilitate international tax avoidance and evasion have been facing growing political pressure to comply with the internationally agreed standards of exchange of tax information. Using data of German investments in tax havens, we find evidence that the conclusion of a bilateral tax information exchange agreement (TIEA) is associated with fewer operations in tax havens and the number of German affiliates has on average decreased by 46% compared to a control group. This suggests that firms invest in tax havens not only for their low tax rates but also for the secrecy they offer.
    Keywords: tax havens,tax information exchange agreements,location decisions,international taxation
    JEL: F21 F23 H87
    Date: 2015
  6. By: Alejandro Esteller-Moré (Universitat de Barcelona & IEB); Ignacio Mauleón (Universidad Rey Juan Carlos); James Alm (Tulane University)
    Date: 2014

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