nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2015‒05‒02
six papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Estimation of Unaccounted Income Using Transport as a Universal Input: A Methodological Note. By Mukherjee, Sacchidananda; Rao, R. Kavita
  2. Factors Influencing Unincorporated Enterprises to Register under Value Added Tax (VAT): An Analysis with Enterprises Survey Data. By Mukherjee, Sacchidananda; Rao, R. Kavita
  3. Tax Compliance and Information Provision: A Field Experiment with Small Firms By Doerrenberg, Philipp; Schmitz, Jan
  4. Do Informal Workers Queue for Formal Jobs in Brazil? By Fábio Veras Soares
  5. Some Stylized Facts of the Informal Sector in Brazil in the 1980’s end 1990’s By Fábio Veras Soares
  6. Egypte 1998-2012: de l’emploi public protégé à l’emploi informel précaire, un marché du travail en déshérence By Isabelle Bensidoun; Aude Sztulman

  1. By: Mukherjee, Sacchidananda (National Institute of Public Finance and Policy); Rao, R. Kavita (National Institute of Public Finance and Policy)
    Abstract: There has been a lot of interest in understanding and measuring the size of unaccounted incomes in economies. There are several methods to measure size of unaccounted income (or shadow economy) - e.g., monetary approach (or currency demand approach), latent variable approach and global indicator approach. Present paper proposes an alternative method by using transport as a universal input. The method is applied to Indian data. To capture the changing structural relationship between input-output and annual volatility of demands, we tested the methodology for two successive Input-Output tables and three consecutive financial years. Since the analysis is based on assumptions, a comparative static analysis is carried out to check the sensitivity of estimates to changes in the assumptions.
    Keywords: Unaccounted income ; Under-reporting of GDP ; Road Freight Transport ; Input-Output Approach ; Diesel Adulteration ; India
    Date: 2015–04
  2. By: Mukherjee, Sacchidananda (National Institute of Public Finance and Policy); Rao, R. Kavita (National Institute of Public Finance and Policy)
    Abstract: Unincorporated enterprises often bypass formal regulations in general and taxation in particular. However, escaping formal regulations does not always favour business of unincorporated enterprises and attracts multiple sources of exploitation (e.g., paying bribe to local administration, police and politicians). In other words, the benefits of that enterprises could reap by becoming part of the formal regulatory system often exceeds the costs of becoming a formal entity. Bringing unincorporated enterprises under taxation system is a challenge often faces by tax administrators and it is in this regard the present study explores the factors which influence decision of unincorporated enterprises to get registered with State tax authority. However, registration with State tax authority does not imply that the enterprises have to pay taxes and/or file return if they are not active or annual turnover does not exceed the threshold level. The study throws up interesting results for policy makers and tax administrators.
    Keywords: Tax Registration ; Indirect Tax ; Unincorporated Enterprises ; State Sales Tax/VAT Registration ; Partnership Firms ; Proprietary Enterprises ; Probit Model ; India
    Date: 2015–04
  3. By: Doerrenberg, Philipp (ZEW Mannheim); Schmitz, Jan (University of Lausanne)
    Abstract: We study a field experiment on tax compliance in Slovenia. Small accounting companies were randomly assigned to an untreated control group and two treatment groups. Companies in the first treatment group received a letter that highlighted the importance of paying taxes and informed about the likelihood of becoming subject to an audit. In the second treatment group, tax officers from the tax authorities handed out in person the same letter that companies in the first treatment group received by post. The results indicate that such letters can increase compliance, and trigger even more compliance if handed over in person. These findings are in line with the theoretical predictions that we derive to rationalize the experiment.
    Keywords: tax compliance, audits, randomized field experiment, tax authority, information provision
    JEL: H20 H32 H50 C93
    Date: 2015–04
  4. By: Fábio Veras Soares
    Abstract: This paper investigates the existence of a job queue for formal (registered) jobs in the Brazilian labour market in an endogenous switching regression framework. This approach aims at correctly specifying the allocation process in the presence of queuing and getting unbiased wage equation estimates in order evaluate the role of wage differential between formal and informal sector in determining sector allocation. We estimate three types of bivariate probit specifications in order to evaluate the sensitivity of the results to different assumptions about the sector allocation process. In particular, we assess the sensitivity of the job queue estimates to the usual assumption of partial observability using subjective survey questions on the desire of informal (non-registered) workers to switch to formal job. Our tests were not able to reject the hypothesis of job queue. Our estimates of the job queue “length” for selected groups show that non-white, female, illiterate, “new entrants” and former informal workers are the groups with the lower probability of being chosen from the queue conditional on being in the queue. This result is particularly strong for workers whose last job was in the informal sector, suggesting that a spell in the informal sector may jeopardize the worker’s chance of getting a formal job. Este artigo investiga a existência de fila por trabalhos formais (com carteira) no mercado de trabalho brasileiro. Estima-se uma regressão com mudança endógena (endogenous switching regression) a fim de especificar corretamente o processo de alocação setorial dos trabalhadores na presença de filas, e desse modo, conseguir estimar o diferencial de salários entre trabalhadores do setor formal e do informal livre de viés de seletividade. Foram avaliados três diferentes especificações de probit bivariados com o intuito de avaliar a sensibilidade das estimativas das filas a diferentes hipóteses sobre o processo de alocação setorial. Em particular, testou-se a sensibilidade das estimativas das filas por trabalho à hipótese de observação parcial dos modelos de fila por trabalho usando perguntas subjetivas de pesquisas (Pnad 1990) sobre o desejo dos trabalhadores do setor informal de mudar para um emprego formal. Os testes não rejeitam a hipótese de existência de fila por trabalho formal. Entre os trabalhadores com maiores dificuldades de serem escolhidos da fila, uma vez que estejam nela, estão os negros, as mulheres, os analfabetos, os jovens que estão entrando no mercado de trabalho e os trabalhadores que foram informais no último trabalho. Este último resultado sugere que um período no setor informal reduz bastante a chance de um trabalhador conseguir um posto de trabalho formal no futuro.
    Date: 2015–01
  5. By: Fábio Veras Soares
    Abstract: Two facts have characterized the evolution of the informal sector in Brazil during the last two decades: the increase in the proportion of non-registered workers and the diminishing wage gap between non-registered and registered workers. In this paper, we briefly review the literature on informal sector in developing countries and document both the increase of the informal sector and the fall in the wage gap in Brazil. Besides, we investigate which factors were responsible for the fall in the wage gap and how this reduction has contributed to reduce wage inequality between 1981 and 1999. Among our findings, we would highlight: i) the coincidence between these two movements and the market-oriented reforms of the early 1990’s; ii) that the fall in the formal/informal wage gap has substantially contributed to the decrease in wage inequality. After education, the fall in the wage premium due to the possession of a work-card was the main responsible for bringing down wage inequality. Why and how it happened is an open debate. We will tackle this issue on two forthcoming papers were we investigate the role of the trade liberalization (Soares, 2004a) and the effects of the increasing indexation of informal sector wages to the minimum wage (Soares, 2004b). Dois fatos caracterizaram a evolução do setor informal no Brasil nas últimas duas décadas: o aumento na proporção de empregados sem registro em carteira e a redução no diferencial de salários entre trabalhadores registrados (com carteira) e sem registro (sem carteira). Neste trabalho, foi brevemente revisada a literatura sobre o setor informal em países em desenvolvimento e documentados tanto o aumento da informalidade quanto a redução do diferencial de salários. Adicionalmente, investigouse quais fatores foram responsáveis pela redução no diferencial de salários e como tal redução contribuiu para a diminuição da desigualdade salarial entre 1981 e 1999. Entre os resultados encontrados, destacam-se: i) a coincidência entre esses dois fenômenos e as reformas pró-mercado do início dos anos 1990; ii) a redução do diferencial de salários formal/informal como o segundo fator mais importante para a redução da desigualdade de salários, após educação. Por que e como isso ocorreu ainda são questões abertas ao debate. Tais aspectos serão analisados em dois Textos para Discussão que serão publicados futuramente. Neste trabalho, tanto o impacto da abertura comercial sobre o setor informal como os efeitos da crescente indexação dos salários do setor informal ao salário mínimo serão estudados.
    Date: 2015–01
  6. By: Isabelle Bensidoun (Centre d’études de l’emploi, PSL, Université Paris-Dauphine, LEDa, IRD UMR DIAL); Aude Sztulman (PSL, Université Paris-Dauphine, LEDa, IRD UMR DIAL, 75016 Paris, France)
    Abstract: (english) Over the last two decades the Egyptian labor market has undergone major changes that the social claims of the January 2011 revolution brought to light. Among them, lack of job security and associated weak social protection have been particularly criticized. Therefore the aim of this article is it to present an overview of employment in Egypt, with a specific focus on the evolution of informal employment. To this end we use individual data from nationally representative household surveys carried out in 1998, 2006 and 2012. The descriptive and econometric analysis illustrates that over the period studied the withdrawal of the state as a provider of employment was very marked. Simultaneously, the state’s lack of commitment to enforce labor laws in the private sector has led to a significant increase in informal employment. Informal jobs concern specifically men, young people and the less qualified workers. Though, over time, age and education provide less effective protection against informal employment. The majority of private sector jobs not only lack social protection but are also becoming more and more insecure. _________________________________ (français) Le marché du travail égyptien a connu, au cours des deux dernières décennies, des mutations importantes que les revendications sociales de la révolution de janvier 2011 ont mises au jour. Parmi elles, le manque de sécurité des emplois et la faible couverture sociale qui leur est associée ont été particulièrement dénoncés. Aussi l’objectif de ce travail est-il de présenter un panorama de l’emploi en Egypte, en s’intéressant en particulier à l’évolution de l’emploi informel. A cette fin les données individuelles issues d’enquêtes sur les ménages représentatives au niveau national et disponibles pour trois années (1998, 2006 et 2012) seront mobilisées. Les analyses descriptive et économétrique montrent que le désengagement de l’Etat en tant que pourvoyeur d’emplois a été particulièrement marqué sur cette période. Dans le même temps, son absence d’engagement à faire respecter la législation du travail au secteur privé s’est traduit par une progression significative de l’emploi informel. Ce dernier touche particulièrement les hommes, les jeunes et les moins éduqués bien que l’âge et l’éducation assurent, avec le temps, une protection de moins en moins efficace face à l’emploi informel. A cette absence de protection sociale de la plupart des emplois privés s’ajoute la précarité qui caractérise nombre d’entre eux.
    Keywords: Labor market, informal employment, Egypt, Marché du travail, emploi informel, Egypte.
    JEL: J21 J45 O53
    Date: 2015–04

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