nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2015‒12‒20
six papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Compliance, Informality and Contributive Pensions By Marie-Louise Leroux; Dario Maldonado; Pierre Pestieau
  2. Inclusive unions in a dualised labour market? The challenge of organising labour market policy and social protection for labour market outsiders By Niccolo Durazzi
  3. Finding a path to formalization in Benin :early results after the introduction of the entreprenant legal status By Benhassine,Najy; Mckenzie,David J.; Pouliquen,Victor Maurice Joseph; Santini,Massimiliano
  4. The informal aspects of the activity of countries studied through Social Accounting and Socio-Demographic Matrices. By Santos, Susana
  5. Implication of Recent Federal Personal Income Tax Increases for Income Tax Evasion, Tax Revenues, and Budget Deficits By Boylan, Robert; Cebula, Richard; Foley, Maggie; Izard, Douglass
  6. Impacto tributario de la Ley 1429 del 2010 en la pequeña empresa en El Espinal, Tolima By Carlos Albeiro Alturo Fonseca

  1. By: Marie-Louise Leroux; Dario Maldonado; Pierre Pestieau
    Abstract: We consider a political economy model in which agents have the possibility to hide part of their earnings in order to avoid taxation. Taxation is exclusively used to finance a pension system. If the pension system is implemented, agents in their old age receive a benefit which includes both a Bismarkian and a Beveridgian component. We show that in the absence of compliance costs, agents are indifferent to the tax rate level as in response, they can perfectly adapt their level of compliance. The public pension system is found to be at least partially contributory in order to increase compliance and thus to increase the tax base. When compliance costs are introduced, perfect substitutability between compliance and taxation breaks down. Depending on the relative returns from public pensions and private savings as well as on the elasticity of compliance to income, we obtain that the preferred tax rate should be increasing or decreasing in income. The majority voting tax rate is more likely to be positive when the median income is low and when the return from public pensions dominates that of private savings. The level of the Bismarkian pillar will now be chosen so as to account for increased political support, for increased direct redistribution toward the worst-off agent, and increased tax base.
    Keywords: Compliance costs, majority voting, public pensions, tax evasion,
    JEL: H55 I13 D91
    Date: 2015–12–10
  2. By: Niccolo Durazzi
    Abstract: Dynamics of labour market dualisation have affected most Western European countries over the last two decades and trade unions have been often seen as conservative institutions protecting the interests of their core constituencies and as such contributing to labour market dualisation. However, empirical evidence from Italy shows that unions’ stance towards atypical workers has been more inclusive than the literature expected, despite the conditions for pro-insider policies being firmly in place, and unions have emerged as important actors in the organisation of social protection for labour market outsiders. By analysing unions’ strategies towards temporary agency workers in Italy through a disaggregated approach (i.e. focussing separately on salary and job protection; active labour market policies; and income protection), I reconcile the empirical observations that conflict with the theoretical expectations. I argue that unions have indeed put in place inclusive, yet selective, policies towards atypical workers and that unions’ identity is a central explanatory variable to understand the puzzling coexistence of a dualised labour market and (selectively) inclusive unions. Through a disaggregated identity-bound analysis of unions’ strategies, I shed new light on the complex relationship between labour market dualisation and the dualisation of social protection. In particular, findings suggest that paradoxically unions’ strategies to counteract labour market dualisation may be furthering the insider-outsider divide in terms of social protection. I also suggest that a clearer analytical distinction between labour market dualisation and welfare dualisation is needed in future research and that the understanding of unions’ strategies towards marginal workers would greatly benefit from a systematic disaggregated analysis of unions’ agency.
    Keywords: trade unions, dualisation, interests, ideas, atypical work, Italy
    Date: 2015–10
  3. By: Benhassine,Najy; Mckenzie,David J.; Pouliquen,Victor Maurice Joseph; Santini,Massimiliano
    Abstract: In April 2014, the Government of Benin launched the entreprenant status, a simplified and free legal regime offered to small informal businesses to enter the formal economy. This paper presents the short-term results of a randomized impact evaluation testing three different versions of the entreprenant status on business registration decisions, each version including incremental incentives to registration: (i) information on the new legal status and its benefits, (ii) business training, counseling services, and support to open a bank account, (iii) tax mediation services. The study included 3,600 informal businesses operating with a fixed location in Cotonou, Benin, which were randomly allocated between three treatment groups and one control group. One year after the program launch, all versions of the program had significant impact on formalization rates. The impact was 9.1 percentage points in the first treatment group; 13 percentage points in the second group; and 15.8 percentage points in the last group. The program had a higher impact on male business owners, with more education, operating outside Dantokpa Market, in sectors other than trade, and that before being offered the incentives to formalization had characteristics similar to businesses that were already formal. Data from a second follow-up survey, which is expected to take place in March 2016, will explore the impacts on other outcomes, like business performances or access to banking.
    Keywords: E-Business,Debt Markets,Business Environment,Competitiveness and Competition Policy,Business in Development
    Date: 2015–12–09
  4. By: Santos, Susana
    Abstract: Approaches based on Social Accounting Matrices (SAMs) and Socio-Demographic Matrices (SDMs) will be presented as a way of capturing relevant networks of linkages and the corresponding multiplier effects, which can subsequently be used for modelling the activity of the countries to be studied. Emphasis will be placed on the activity of household unincorporated enterprises, also known as informal enterprises. Based on methodological principles derived mainly from the works of Richard Stone, this study will be developed in a matrix format, including, on the one hand, people – represented by a SDM – and, on the other hand, activities, products, factors of production and institutions – represented by a SAM. The exposition will be accompanied by an application to Portugal, in which different scenarios will be briefly presented, involving changes in incomes and expenditures. The macroeconomic effects of these changes will be summarised in the form of changes in the macroeconomic aggregates: Gross Domestic Product, Gross National Income and Disposable Income.
    Keywords: Social Accounting Matrix; Socio-Demographic Matrices; Informal Economy.
    JEL: E01 J11
    Date: 2015
  5. By: Boylan, Robert; Cebula, Richard; Foley, Maggie; Izard, Douglass
    Abstract: In this study, we present evidence which strongly suggests that personal income tax evasion has been an increasing function of the maximum marginal federal personal income tax rate over the period 1970-2008, which constitutes the most current data currently available on aggregate personal income tax evasion. This evidence leads us to conclude that the federal personal income tax increases implemented effectively in 2013 under provisions of American Taxpayer Relief Act of 2012 and the Patient Protection and Affordable Care Act of 2010 will result in increased tax avoidance behavior. Among other things, this public-policy-induced increase in personal income tax evasion implies that the federal budget deficits in coming years will be greater than projected by the CBO and various government agencies. We also find that tax avoidance activity is an increasing function of the unemployment rate, the interest rate yield on three year Treasury Notes, and per capita real GDP (adopted as a measure of per capita real income), and a decreasing function of the Tax Reform Act of 1986 (during its first two years of being implemented), the IRS audit rate, and the ratio of the tax free interest rate yield on high grade municipals to the interest rate yield on ten year Treasury Notes. Thus, there is also evidence that persistently high unemployment rates may increase tax evasion and the size of federal budget deficits, although increasing the audit rate by IRS personnel may raise tax compliance to some extent.
    Keywords: underground economy, tax evasion, tax rate increases, tax revenues, budget deficit
    JEL: H24 H26 M42
    Date: 2014–07–12
  6. By: Carlos Albeiro Alturo Fonseca
    Abstract: El fomento y la creación de empresa es una de las iniciativas que mayor relevancia tiene en el ámbito mundial y nacional, debido al gran aporte al desarrollo económico, social y cultural que estas generan. La Ley 1429 de 2010 es una política clara del gobierno Colombiano Que busca el alcance de la formalización y generación de empleo en la pequeña empresa, generando incentivos en la etapa inicial, aumentando los beneficios y disminuyendo los costos de formalización, pretendiendo contribuir con el progreso del país. La metodología fue de tipo descriptiva-exploratoria, la población objeto de estudio se tomó de las empresas debidamente registradas, se aplica el instrumento de recolección de datos que fue debidamente cotejada para darle coherencia a la información, la encuesta fue aplicada al representante legal y al contador público de las empresas formalizadas, determinando un impacto bajo en la formalización de la pequeña empresa.
    Keywords: Pequeña empresa; Formalización empresarial; Beneficios tributarios; Emprendimiento.
    JEL: D02 D21 H25 J48
    Date: 2015–09–01

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