nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2016‒04‒04
three papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Revisiting the impact of the Brazilian SIMPLES program on firms'formalization rates By Piza,Caio
  2. On tax evasion, entrepreneurial generosity and fungible assets By Bittschi, Benjamin; Borgloh, Sarah; Moessinger, Marc-Daniel
  3. Mobile Phones in Conflicts of Financial Intermediation By Asongu, Simplice; Tchamyou, Vanessa

  1. By: Piza,Caio
    Abstract: A recent survey of rigorous impact evaluations of programs to help small and medium-size firms to formalize indicates that the programs do not seem to work for most informal firms. One of the few exceptions finds large effects of a tax simplification program in Brazil called SIMPLES on firms'formalization rates and performance indicators. Using the same data set but a different identification strategy, another study concludes that the program had limited effect on formalization rates. The aim of this paper is twofold. First, it revisits the two studies to reconcile their conflicting conclusions. Second, it investigates the validity of the identification strategy of both studies. The findings suggest that the conflicting results between the two studies are caused by the dates each used to identify when the program was put into effect. A robustness check indicates that data heaping and seasonality around November cast doubts on the identification strategy used in both studies to estimate the effect of this particular program.
    Keywords: E-Business,Science Education,Microfinance,Small Scale Enterprises,Scientific Research&Science Parks
    Date: 2016–03–16
  2. By: Bittschi, Benjamin; Borgloh, Sarah; Moessinger, Marc-Daniel
    Abstract: We estimate the effects of income from various sources on charitable giving using administrative German income tax data. We demonstrate that charitable contributions are not uniformly affected by different income types. While business and capital income exhibit a positive effect, the remaining income sources do not influence charity on statistically signifcant levels. This exercise is not new and has been conducted for (at least) three different purposes: 1) Relying on the described results, a public finance researcher would state that business and capital income are more prone to tax evasion than the remaining income sources. 2) An entrepreneurship researcher would conclude that business owners are more generous than employees, and 3) a researcher testing the validity of the life cycle theory (or its behavioral counterpart) would refute the fungibility of income. In contrast, we argue that none of these approaches can answer the intended question if solicitation effects of fundraising or measurement error of the income sources are not taken into account. Applying a fixed effect poisson model, we demonstrate that under certain assumptions the results can have a meaningful interpretation.
    Keywords: tax evasion,entrepreneurial behavior,charitable giving,income fungibility,administrative data,fixed effects poisson model
    JEL: D91 E21 H26 H41 L26
    Date: 2016
  3. By: Asongu, Simplice; Tchamyou, Vanessa
    Abstract: To the best our knowledge, in the first empirical macroeconomic examination of the nexus between financial intermediation and mobile phones, Asongu employs two conflicting financial system definitions in the assessment of how mobile phones have stimulated financial development in Africa. Within the framework of the dominant International Monetary Fund’s International Financial Statistics (2008) definition, mobile phones are established to be negatively associated with financial intermediary dynamics of depth, activity and size. Conversely, when the previously neglected informal financial sector is integrated into the conception, definition and measurement of the financial system, mobile phones are positively (negatively) correlated with the informal (formal) financial intermediation sector. The empirical evidence is based on 52 African countries. Causality in the established linkages has been confirmed in subsequent studies by the same author. At least three policy implications derive from the findings. First, the role of informal financial intermediation is increasing to the detriment of formal financial mechanisms. Second, in order to capture the positive effect of mobile phones on finance, it is imperative to integrate the missing informal financial sector component into the IMF definition of the financial system. Third, it is a wake-up call for more scholarly research on: (i) macroeconomic financial development implications of mobile phone penetration and (ii) monetary policy instruments in the face of burgeoning ‘mobile phone’-oriented financial intermediation.
    Keywords: Banking; Mobile Phones; Shadow Economy; Financial Development; Africa
    JEL: E00 G20 L96 O17 O33
    Date: 2015–08

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