nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2016‒07‒16
six papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Informal Sector Misallocation By López-Martín Bernabé
  2. Channelizing Afghanistan to Pakistan Informal Trade into Formal Channels By Adil Khan Miankhel
  3. Disclosure of Corporate Tax Reports, Tax Enforcement, and Insider Trading By Jordi Caballé; Ariadna Dumitrescu
  4. Information Sharing and Financial Sector Development in Africa By Vanessa Tchamyou; Simplice Asongu
  5. CGE model with fiscal sector for Latvia By Konstantins Benkovskis; Eduards Goluzins; Olegs Tkacevs
  6. Notas sobre Informalidade, Produtividade do Trabalho e Grau de Utilização e seus Impactos sobre o Crescimento Econômico no Brasil nos Anos 2000 By Claudio Roberto Amitrano; Gabriel Coelho Squeff

  1. By: López-Martín Bernabé
    Abstract: A quantitative framework of firm dynamics is developed where the size of the informal sector is determined by financial constraints and the burden of taxation. Improving access to credit for formal sector firms increases aggregate TFP and output while reducing the size of the informal sector. Introducing size-dependent taxes reduces the gains from financial development as they incentivize firms to produce at a relatively limited scale. The aggregate effects of eliminating formal sector registration costs are positive but modest relative to previous theoretical models and the gains generated by financial development, and consistent with empirical evidence based on micro-level data.
    Keywords: informal sector; misallocation; aggregate productivity; financial constraints; size-dependent taxes.
    JEL: E26 L11 O11 O17 O40
    Date: 2016–06
  2. By: Adil Khan Miankhel (Embassy of Pakistan)
    Abstract: Along with other routes, the Afghanistan-Pakistan Transit Trade Agreement (APTTA) is being used by informal traders for smuggling goods into Pakistan. Despite enforcement measures, smuggling continues. Informal traders import goods into Afghanistan, and then route those goods back to Pakistan through informal channels to take advantage from the arbitrage opportunity provided by the differences in applied tariff/taxes between the two countries. Therefore, in addition to strict enforcement measures, the issue of informal trade needs to be handled through incentive measures.
    JEL: F13 O24 O19
    Date: 2016–06
  3. By: Jordi Caballé; Ariadna Dumitrescu
    Abstract: In this paper, we analyze the effects of disclosing corporate tax reports on the performance of financial markets and the use of asset prices by the tax enforcement agency in order to infer the true corporate cash flows. We model the interaction between a firm and the tax auditing agency, and highlight the role played by the tax report as a public signal used by the market dealer and the role of prices as a signal used by the tax authority. We discuss the determinants of both the reporting strategy of the firm and the auditing policy of the tax authority. Our model suggests that, despite disclosure of the tax reports being beneficial for market performance (as the spreads and trading costs are smaller than under no disclosure), the tax agency might have incentives to not disclose the tax report when its objective is to maximize expected net tax collection.
    Keywords: disclosure, corporate tax, Insider Trading
    JEL: G12 G14
    Date: 2016–07
  4. By: Vanessa Tchamyou (Yaoundé/Cameroun); Simplice Asongu (Yaoundé/Cameroun)
    Abstract: This study investigates the effect information sharing has on financial sector development in 53 African countries for the period 2004-2011. Information sharing is measured with private credit bureaus and public credit registries. Hitherto unexplored dimensions of financial sector development are employed, namely: financial sector dynamics of formalization, informalization and non-formalization. The empirical evidence is based on Ordinary Least Squares (OLS) and Generalised Method of Moments (GMM). The following findings are established. Information sharing bureaus increase (reduce) formal (informal/non-formal) financial sector development. In order to ensure that information sharing bureaus improve (decrease) formal (informal/non-formal) financial development, public credit registries should have between 45.45 and 50 percent coverage while private credit bureaus should have at least 26.25 percent coverage.
    Keywords: Information sharing; Banking ; Africa
    JEL: G20 G29 L96 O40 O55
    Date: 2016–01
  5. By: Konstantins Benkovskis (Bank of Latvia); Eduards Goluzins; Olegs Tkacevs (Bank of Latvia)
    Abstract: This paper describes the first CGE model for Latvia that consists of 32 industries, 55 products and seven categories of final users. To construct the model we use Latvia's National Supply and Use tables for 2011 from the WIOD database. Special attention is devoted to the fiscal block: the model consists of five government expenditure types and five revenue sources, including such four major taxes as the personal income tax (PIT), state social insurance mandatory contributions (SSIMC), value added tax (VAT) and excise tax. We also introduce an endogenous shadow economy, the size of which depends on the level of tax rates and economic activity. These features of the model allow us to obtain rich and detailed conclusions about the effect of several fiscal measures on Latvia's economy, both in aggregate and by sector.
    Keywords: CGE model, Latvia, fiscal policy
    JEL: D58 C68 H2 H6
    Date: 2016–07–04
  6. By: Claudio Roberto Amitrano; Gabriel Coelho Squeff
    Abstract: Este trabalho procura avançar na discussão sobre as implicações da informalidade no Brasil, apresentando novas evidências sobre a trajetória do valor adicionado, das ocupações e, sobretudo, da produtividade do trabalho nos setores formal e informal, desagregados por atividade econômica. Além disso, são desenvolvidos exercícios contrafactuais para a trajetória dessas variáveis com o intuito de avaliar os possíveis impactos da migração de trabalhadores dos setores não formais para o setor formal e de modificações no grau de utilização da capacidade. This paper aims at discussing the implications of informality in Brazil by presenting new evidence on value added, occupations, and in labor productivity in the formal and informal sectors, disaggregated by economic activity. Moreover, we developed counterfactual exercises for these variables in order to assess the possible impacts of labor migration from non-formal sector to the formal sector as well as from changes in the rate of capacity utilization.
    Date: 2016–05

This nep-iue issue is ©2016 by Catalina Granda Carvajal. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.