nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2016‒07‒02
five papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Cashless Payments and Tax Evasion By Giovanni Immordino; Francesco Flaviano Russo
  2. Informal versus Formal: A Panel Data Analysis of Earnings Gaps in Madagascar By Nordman, Christophe Jalil; Rakotomanana, Faly; Roubaud, François
  3. Does Indonesian National Health Insurance serve a potential for improving health equity in favour of workers in informal economy? By Kartika, Dwintha Maya
  4. The non-observed economy in Uruguay. A look at the first decade of the 21st century By Maira Caño-Guiral
  5. Professor Schneider's Shadow Economy:What do we really know? A Rejoinder By Feige, Edgar L.

  1. By: Giovanni Immordino (Università di Napoli Federico II and CSEF); Francesco Flaviano Russo (Università di Napoli Federico II and CSEF)
    Abstract: Cashless payments hinder tax evasion because they build a trail for the underlying transactions. We find empirical evidence supporting this claim for Europe, showing a negative relationship between VAT evasion and the payments with credit and debit cards. We also find that using electronic cards to gather cash at ATMs, by making cash more abundant, fosters VAT evasion. Policies aimed at reducing tax evasion should therefore subsidize the direct use of electronic cards as payments, not their possession.
    Keywords: tax evasion; electronic payments.
    JEL: O17 H26
    Date: 2016–06–17
  2. By: Nordman, Christophe Jalil (IRD, DIAL, Paris-Dauphine); Rakotomanana, Faly (National Institute of Statistics (INSTAT)); Roubaud, François (IRD, DIAL, Paris-Dauphine)
    Abstract: Little is known about the informal sector's income structure vis-à-vis the formal sector, despite its predominant economic weight in developing countries. While most of the papers on this topic are drawn from (emerging) Latin American, Asian or some African countries, Madagascar represents an interesting case. So far, very few studies in general, even less so in Sub-Saharan Africa, used panel data to provide evidence of the informal sector heterogeneity. Taking advantage of the 1-2-3 Surveys in Madagascar, a four-wave panel dataset (2000-2004), we assess the magnitude of various formal/informal sector earnings gaps. Is there an informal sector job earnings penalty? Do some informal sector jobs provide pecuniary premiums and which ones? Do possible gaps vary along the earnings distribution? Ignoring distributional issues is indeed a strong limitation, given the compound question of how informality affects earnings inequality. We address heterogeneity issues at three different levels: the worker, the employment status (wage employment vs. self-employment) and the earnings distribution. Standard earnings equations are estimated at the mean and at various conditional quantiles of the earnings distribution. The results suggest that the sign and magnitude of the formal-informal sector earnings gaps highly depend on the workers' employment status and on their relative position in the earnings distribution. In the case of a poor and fragile country like Madagascar, these findings provide new and robust empirical backups for the existence of a mix between the traditional exclusion vs. exit hypotheses of the informal sector.
    Keywords: informal sector, earnings gap, transition matrix, panel data, Madagascar
    JEL: J21 J23 J24 J31 O17
    Date: 2016–05
  3. By: Kartika, Dwintha Maya
    Abstract: This study examines whether Indonesian national health insurance system promotes health equity in favour of informal economy workers. It first lays out the theoretical justification on the need of social protection, particularly health protection for informal workers. The paper argues that the absence of health protection for vulnerable informal workers in Indonesia has reinforced health inequity between formal and informal workers, thus provides a justification on extending health protection to this segment. It then boils down its analysis on existing BPJS Health scheme, a government-run national health insurance, and to what extent this scheme serves the needs of informal workers in Indonesia. The finding suggests that several factors (contributory premium, access to healthcare services and politicisation of national healthcare) are responsible for adversely incorporating informal workers; hence fail to promote health equity in favour of vulnerable workers in informal economy.
    Keywords: National Health Insurance; Informal Economy; Universal Health Coverage; Indonesia; Informal workers; Health financing; Social Security; Social Protection; WHO; ILO; BPJS;
    JEL: E26 I1 I13 I14 I15 I18 J46 O17 O29 Y40
    Date: 2015–08
  4. By: Maira Caño-Guiral (Banco Central del Uruguay)
    Abstract: In this paper, a methodological procedure is introduced based on employment variables and a legal criterion for measuring the Non-Observed Economy (NOE) covering the lack of its estimation for a series of years. This procedure is applied for Uruguay and NOE size is estimated for 2001-2010 characterizing it both, through its contribution to gross domestic product and in the principal economic activities in which it is centered. In addition, at the light of the 2008 SNA handbook, a new empirical analytical framework of the NOE is discussed in terms of two big areas that shape it, the informal and the underground, and results of their size in jobs and value added are presented.
    Keywords: Non-Observed Economy, Informal, Underground, Measurement, National Accounts, Uruguay; Economía No Observada, Informal, Subterránea, Medición, Cuentas Nacionales
    JEL: O10 E23 E26 J21 J31
    Date: 2015
  5. By: Feige, Edgar L.
    Abstract: Abstract: Professor Schneider’s “Comment” on my “Reflections” paper does not adequately address the key issues concerning the veracity of his findings, namely issues of documentation, normalization, calibration and replication. Further findings of inadequate documentation, suspicious normalization procedures, unexplained calibration errors and the inability to replicate the results; reinforces the conclusions of my original “Reflections” paper. Schneider’s Shadow Economy results suffer from conceptual flaws, arbitrary data manipulations and insufficient documentation for replication, questioning their place in the academic, policy and popular literature.
    Keywords: Shadow Economy, tax evasion, non-observed economy, unobserved economy, Friedrich Schneider, MIMIC models
    JEL: C51 C82 E41 E6 H26 K42 O17
    Date: 2016–06–09

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