nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2016‒02‒17
seven papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Collusive Tax Evasion and Social Norms By Wrede, Matthias; Abraham, Martin; Lorek, Kerstin; Richter, Friedemann
  2. Anticipated Tax Amnesties and Tax Compliance: An Experimental Study By Koch, Christian; Müller, Cornelius
  3. Voluntary Disclosure of Evaded Taxes - Increasing Revenues, or Increasing Incentives to Evade? By Langenmayr, Dominika Irma
  4. Does Exchange of Information Between Tax Authorities Influence Multinationals' Use of Tax Havens? By Braun, Julia; Weichenrieder, Alfons
  5. Fear of Labor Rigidities: The Role of Expectations on Employment Growth in Peru By Lavado, Pablo; Yamada, Gustavo
  6. Immigration and Prices: Quasi-Experimental Evidence from Syrian Refugees in Turkey By Balkan, Binnur; Tumen, Semih
  7. Friendship and money, oil and water? Credit constraints and "Family and Friends" finance By Wiegand, Manuel

  1. By: Wrede, Matthias; Abraham, Martin; Lorek, Kerstin; Richter, Friedemann
    Abstract: Although collusive tax evasion by buyers and sellers of commodities and also by employers and employees is widespread all over the world, it has rarely been analyzed in the tax evasion literature. To fill this gap and to compare collusive tax evasion with independent tax evasion, this paper develops a simple non-cooperative game-theoretic model and confirms the model's predictions in a laboratory experiment. Because collusive tax evasion involves social interaction, this paper focuses on the effect of social norms and theoretically and empirically demonstrates that the tax compliance norm has a stronger negative effect on the magnitude of collusive tax evasion than on independent tax evasion. The reason for this result is that in a collusive tax evasion game with multiple equilibria social norms act as an equilibrium selection device, whereas social norms need to be internalized to change the behavior of taxpayers who evade taxes unobservedly.
    JEL: H26 A13 H29
    Date: 2015
  2. By: Koch, Christian; Müller, Cornelius
    Abstract: Many countries grant exemption from legal prosecution under certain conditions, allowing for voluntary disclosures regarding tax evasion. It has been claimed that tax amnesties are most successful when they are accompanied by an increase in compliance efforts because amnesties then help tax evaders to adjust to the new circumstances. At the same time, time-limited amnesties are often repeated or in some countries even permanent amnesty laws exist. When tax amnesties are, however, anticipated, they can serve as an insurance against a rise in the detection probability, potentially leading to less and not more tax compliance. We test the relevance of this insurance effect in an experimental tax game and find that the overall tax compliance actually decreases by about 9 percent because of this effect.
    JEL: C91 H26 H24
    Date: 2015
  3. By: Langenmayr, Dominika Irma
    Abstract: Many countries apply lower fines to tax evading individuals when they voluntarily disclose the tax evasion they committed. I model such voluntary disclosure mechanisms theoretically and show that while such mechanisms increase the incentive to evade taxes, they nevertheless increase tax revenues net of administrative costs. I then test the effects of voluntary disclosure in two separate empirical analyses. First, I confirm that voluntary disclosure mechanisms increase tax evasion, using the introduction of the 2009 offshore voluntary disclosure program in the U.S. for identification. Second, I quantify the tax revenues of voluntary disclosures by considering how some state-level governments in Germany bought whistle-blower data from foreign bank employees, thereby increasing the detection probability and the usage of voluntary disclosures.
    JEL: H26 K42 H24
    Date: 2015
  4. By: Braun, Julia; Weichenrieder, Alfons
    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.
    JEL: F21 F23 H87
    Date: 2015
  5. By: Lavado, Pablo (Universidad del Pacifico); Yamada, Gustavo (Universidad del Pacifico)
    Abstract: Many studies have been conducted to analyze the effect of stricter Employment Protection Legislation (EPL). However, almost all of them has focused on an ex-post impact; leaving aside a second but equally important channel: expectations. This paper aims to analyze the role of expectations on Peruvian formal and informal labor market; using news as our identification variable. We use the monthly number of news related to the approval of the General Labor Law (GLL), a proposal entailing future stronger labor rigidities, from January 2001 to May 2012. Using the Permanent Employment Survey (EPE), we find a negative relation between expectations towards a stricter labor market and both employment and average income. News mainly affect formal occupied EAP, arousing a substitution effect from formal to informal employment. We also discover that the effect of expectations differs in periods with higher versus lower GDP growth. Finally, we find some evidence supporting news having a cumulative effect: the larger the previous stock of news, the weaker the effect.
    Keywords: employment protection legislation, expectations, labor law, informal labor market
    JEL: J21 J23 J24 J32
    Date: 2015–12
  6. By: Balkan, Binnur (Central Bank of Turkey); Tumen, Semih (Central Bank of Turkey)
    Abstract: We exploit the regional variation in the unexpected (or forced) inflow of Syrian refugees as a natural experiment to estimate the impact of immigration on consumer prices in Turkey. Using a difference-in- differences strategy and a comprehensive data set on the regional prices of CPI items, we find that general level of consumer prices has declined by approximately 2.5 percent due to immigration. Prices of goods and services have declined in similar magnitudes. We highlight that the channel through which the price declines take place is the informal labor market. Syrian refugees supply inexpensive informal labor and, thus, substitute the informal native workers especially in informal labor intensive sectors. We document that prices in these sectors have fallen by around 4 percent, while the prices in the formal labor intensive sectors have almost remained unchanged. Increase in the supply of informal immigrant workers generates labor cost advantages and keeps prices lower in the informal labor intensive sectors.
    Keywords: immigration, consumer prices, Syrian refugees, natural experiment, informal employment
    JEL: C21 E31 J61
    Date: 2016–01
  7. By: Wiegand, Manuel
    Abstract: The use of informal finance is primarily discussed in the context of developing countries and start-up businesses. Survey data used in this study, however, shows that ``Family and Friends'' (F\&F) finance is also remarkably widespread among established firms in Germany, a highly developed country. Establishing a causal link, Instrumental Variables estimations in this study show that firms use F\&F finance in response to credit constraints. Considering that welfare gains from financial intermediation no longer materialize when firms go informal, this result is of utmost importance in the analysis of the consequences of a non-functioning financial system, even in developed economies.
    JEL: G21 G23 C13
    Date: 2015

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