nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2016‒05‒28
seven papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Heuristic Driven Agents in Tax Evasion: an Agent-based Approach By Luigi Mittone; Gian Paolo Jesi
  2. Tax Administration Reform in China; Achievements, Challenges, and Reform Priorities By John Brondolo; Zhiyong Zhang
  3. Measuring Tax Administration Effectiveness and its Impact on Tax Revenue By DAS-GUPTA Arindam; B. ESTRADA Gemma; PARK Donghyun
  4. Fiji: Creating Quality Jobs - Employment Diagnostic Study By Asian Development Bank (ADB); Asian Development Bank (ADB); Asian Development Bank (ADB); Asian Development Bank (ADB)
  5. Informal Labour Markets in Pakistan By Muhammad Ali Choudhary; Saima Naeem; Gylfi Zoega
  6. Eliciting women’s willingness to take a job. Evidence from displaced and extremely poor women in Cali, Colombia By Susana Martínez-Restrepo; Juan C. Mejía; Erika Enríquez
  7. Enabled to work: the impact of government housing on slum dwellers in South Africa By Simon Franklin

  1. By: Luigi Mittone; Gian Paolo Jesi
    Abstract: The Allingham and Sandmo model is an adaptation of the standard expected utility maximization framework where the taxpayer is defined as a representative agent who is coping with a risky choice. The main limit of this model regards the assumption of perfect rationality from the agent’s side and the impossibility to study at the macro level a situation where many heterogeneous agents interact together. The aim of this work is to try to overcome, at least partially, some of the neoclassical standard approaches in this field. More precisely, we present a very simplified, agent- based, fiscal system with heterogeneous tax payers, interacting within a public good game framework. Heterogeneity has been introduced in our model by designing the agents like simple heuristics. The environment has been designed by a voluntary supply public good context reinforced through tax audits and fines. Looking for more realism, we also allowed agents to mutate their heuristics and we introduced two cross sectional types of agents: the “employees" and the “self-employees" allowing our agents to switch from one type to the other and vice-versa. Finally, the system is dynamic over time, since new agents can join over time to mimic the idea of having a growing population over time. We obtained a complex adaptive system (CAS) with heterogeneous agents, dynamically evolving, able to describe the adaptation of agent’s behaviour either concerning evading decision and the preferred kind of heuristic.
    Date: 2016
  2. By: John Brondolo; Zhiyong Zhang
    Abstract: Tax administration improvements have contributed significantly to a doubling of China’s tax-to-GDP ratio and the substantial reduction in taxpayers’ compliance costs since the mid-1990s. This paper describes the key features of China’s tax administration and their evolution over the last 20 years. It also identifes emerging challenges to the tax system and areas where further tax administration improvements are needed to sustain tax revenue and reduce taxpayers’ compliance costs in the future.
    Keywords: Tax administration;China;Tax reforms;Risk management;Tax system reviews;Tax Administration, Tax Administration Reform, China Tax Administration
    Date: 2016–03–17
  3. By: DAS-GUPTA Arindam (Goa Institute of Management); B. ESTRADA Gemma (Asian Development Bank); PARK Donghyun (Asian Development Bank)
    Abstract: This paper proposes a method for constructing a tax administration measure of effectiveness or TAME, and describes its desirable properties. TAME was empirically constructed using data from external audits of value-added tax administrations of India’s state governments. TAME was used to quantitatively assess the impact of tax administration effectiveness on tax revenues. The impact was found to be both statistically significant and large. The causes of tax administration effectiveness in the poorly performing states were then identified. Finally, this paper suggests guidelines for constructing TAMEs for other jurisdictions and time periods.
    Keywords: effectiveness, India, tame, tax administration, tax revenues, value-added tax
    JEL: H21 H25
    Date: 2016–04
  4. By: Asian Development Bank (ADB); Asian Development Bank (ADB) (Economic Research and Regional Cooperation Department, ADB); Asian Development Bank (ADB) (Economic Research and Regional Cooperation Department, ADB); Asian Development Bank (ADB)
    Abstract: Even though official unemployment in Fiji is low, the country has a large informal labor market in which workers toil without income security or social protection. Subsistence activities are widespread, underemployment is high, and the number of working poor is large. This report, a joint effort of the Asian Development Bank and the International Labour Organization, seeks to foster a deeper understanding of the context, constraints, and opportunities for increasing productive employment, and inform evidence-based policies that will promote productive employment and decent work. As Fiji enjoys renewed economic growth, it must ensure that revival is inclusive of all Fijians.
    Keywords: fiji employment, fiji labor market, jobs, fiji underemployment, fiji unemployment, subsistence activities, working poor, ilo, adb, productive employment, decent work, human capital, economic growth, labor market policies, labor market regulations, labor market institutions
    Date: 2015–12
  5. By: Muhammad Ali Choudhary (State Bank of Pakistan); Saima Naeem (State Bank of Pakistan); Gylfi Zoega (University of London,)
    Abstract: This paper describes the results of a survey of informal-sector firms in Pakistan. Firms belong to the informal sector mainly because of scarce financial resources. There are significant differences in the level of wages and the flexibility of wages with the informal sector having both lower wages and greater flexibility than the formal sector. While minimum wages are less binding in the informal sector, a sort of indexation of wages to inflation is more common. In spite of these differences the reasons for not cutting wages in a recession are similar between the two sectors.
    Keywords: Informal sector, wage setting, wage rigidity.
    JEL: E24 E26 J31 J46
    Date: 2016–04
  6. By: Susana Martínez-Restrepo; Juan C. Mejía; Erika Enríquez
    Abstract: Este documento presenta un experimento de laboratorio sobre las preferencias de mujeres desplazadas por la violencia y en condición de extrema pobreza, residentes en Cali, Colombia, en el mercado laboral formal e informal. En este experimento se obtienen las decisiones que estas mujeres toman respecto al ingreso constante diario, obtenido de trabajar en casa en un negocio pequeño y de baja productividad (como cocinar o coser), contra la opción de aumentar su ingreso diario trabajando fuera de casa, como empleados. El salario elegido está sujeto al número de horas lejos de casa, el precio del transporte y el costo del cuidado de los niños y/o adolecentes, y adicionalmente de si el empleo es formal o informal. Un total de 225 mujeres participaron en este experimento. Para obtener las negociaciones sobre las opciones de trabajo al interior de los hogares, el grupo de tratamiento estaba compuesto por mujeres casadas con sus esposos presentes en el experimento, y un grupo de control conformado por mujeres casadas sin que sus esposos estuvieran presentes. Se invitaron parejas para negociar en diferentes escenarios. Los resultados muestran que no hay diferencias significativas entre los grupos de tratamiento y de control, en el caso de los empleos informales. Mujeres teniendo a sus esposos presentes eran menos propensas a aceptar empleos con un menor salario en el sector formal, y más propensas a quedarse en casa, que sus contrapartes que no tenían a sus maridos presentes. Las preferencias de trabajo también varían de acuerdo a los costos del cuidado y del número de hijos menores a los 18 años.
    Keywords: Mujeres Desplazadas y en Extrema Pobreza, Preferencias en el Mercado de Trabajo, Negociaciones al Interior del Hogar, Voluntad de Aceptar un Empleo, Cali, Colombia
    JEL: D12 J30
    Date: 2016–03–31
  7. By: Simon Franklin
    Abstract: This paper looks at the link between housing conditions and household income and labour market participation in South Africa. I use four waves of panel data from 2002-2009 on households that were originally living in informal dwellings. I find that those households that received free government housing later experienced large increases in their incomes. This effect is driven by increased employment rates among female members of these households, rather than other sources of income. I take advantage of a natural experiment created by a policy of allocating housing to households that lived in close proximity to new housing developments. Using rich spatial data on the roll out of government housing projects, I generate geographic instruments to predict selection into receiving housing. I then use housing projects that were planned and approved but never actually built to allay concerns about non-random placement of housing projects. The fixed effects results are robust to the use of these instruments and placebo tests. I present suggestive evidence that formal housing alleviates the demands of work at home for women, which leads to increases in labour supply to wage paying jobs.
    Keywords: housing; labour supply; time allocation; home production
    JEL: R14 J01
    Date: 2016–05

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