nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2016‒08‒28
five papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Informal Employment in China: Trends, Patterns and Determinants of Entry By Liang, Zhe; Appleton, Simon; Song, Lina
  2. Managing Innovation under Competitive Pressure from Informal Producers Managing Innovation under Competitive Pressuire from Informal Producers By Pedro Mendi; Rodrigo Costamagna
  3. The effects of size-based regulation on small firms: evidence from VAT threshold By Jarkko Harju; Tuomas Matikka; Timo Rauhanen
  4. Informalidad laboral y calidad del empleo en la Región Pacífica colombiana. By Luis Armando Galvis-Aponte.; Gerson Javier Pérez-Valbuena.
  5. A Problemática do Dimensionamento da Informalidade na Economia Brasileira By Mauro Oddo Nogueira

  1. By: Liang, Zhe (University of Nottingham); Appleton, Simon (University of Nottingham); Song, Lina (University of Nottingham)
    Abstract: We empirically deconstruct informal employment in China into private business owners and casual workers without job contracts. Survey data from 2007 and 2013 document a rise in informal employment to the point where it exceeds formal employment, potentially an unintended consequence of the 2008 New Labour Contract Law. Compared with formal employees and business owners, casual workers report the lowest monetary and subjective wellbeing although business owners work longer hours with less social protection. Descriptive statistics and multivariate modelling reveal formal employees tend to have more favoured characteristics, often being educated, male, healthy and able bodied. Casual workers are more likely to have the characteristics of vulnerable groups, so the growth of casual employment is particularly concerning. There are indications that running small business is not always a sign of vulnerability and it may provide job flexibility for those with dependents to care for.
    Keywords: informal employment, determinants, human capital, China
    JEL: D03 J46 O15 P23 P36
    Date: 2016–08
  2. By: Pedro Mendi (Navarra Center for International Development); Rodrigo Costamagna (INALDE Business School, Universidad de la Sabana)
    Abstract: This paper studies the impact on innovation of competition against firms in the informal sector. Using the World Bank’s Enterprise Survey data from a sample of African and Latin American countries, we find that the marginal impact of informality on innovation by formal firms decreases with the intensity of competitive pressure from informal firms, consistent with an inverted-U relationship between propensity to innovate and competitive pressure from firms in the informal sector.
    Date: 2015–11–20
  3. By: Jarkko Harju; Tuomas Matikka; Timo Rauhanen
    Abstract: Various types of size-based regulations for firms are typical in most countries (tax schedules, accounting rules, health and safety standards etc.). However, there is only limited evidence of how owners of small firms respond to such rules, and what are the underlying mechanisms behind the observed behavior. We study these questions by examining the effects of the value-added tax (VAT) sales threshold using tax register data on the universe of Finnish firms and their owners. We find sizable bunching of firms in the sales distribution just below the VAT threshold. This implies that small firms actively avoid VAT liability. We utilize variation in both the VAT rate and reporting requirements to provide compelling evidence that the response is caused by the compliance costs of VAT reporting rather than the size of the tax rate. This shows that the costs related to reporting and understanding taxes induce greater distortions than pure tax incentives, especially among low-income entrepreneurs. In addition, we find no explicit evidence of avoidance or evasion, which suggests that firms respond by reducing their true output. Also, bunching behavior is very permanent, implying that the VAT threshold hinders the growth of small firms.
    Keywords: Value-added tax, compliance costs, small firms, entrepreneurs, bunching
    JEL: H32 L11 D22 H25
    Date: 2016–06–14
  4. By: Luis Armando Galvis-Aponte.; Gerson Javier Pérez-Valbuena.
    Abstract: El objetivo del presente documento es elaborar un diagnóstico sobre la informalidad laboral y su relación con la calidad del empleo en la región Pacífica colombiana. Los resultados muestran que en el Pacífico dos de cada tres empleados se ubican en el sector informal. Esta observación tiene implicaciones claves para la calidad del empleo y el bienestar de la población. En efecto, la región Pacífica presenta baja calidad del empleo, que es más crítica para los individuos con bajos niveles educativos, los empleados domésticos y, por ubicación geográfica, para los individuos del departamento de Nariño. Classification JEL:J01, J81, J46, R23.
    Keywords: mercado laboral, informalidad, condiciones laborales, Pacífico colombiano.
    Date: 2015–12
  5. By: Mauro Oddo Nogueira
    Abstract: As empresas de pequeno porte têm sido objeto frequente de debates tanto no contexto da economia quanto das políticas públicas. No entanto, é inegável a imbricação existente entre estas e a economia informal. Neste contexto, este estudo tem por objetivo apresentar e analisar as diferentes formas de conceituação e os resultados obtidos nas diversas tentativas de dimensionamento da economia informal no Brasil. Busca também deixar evidente que não há uma linha divisória definida entre o que é formal e informal; essas duas realidades se articulam e se complementam na semiformalidade. Ao longo do estudo, ficam claras as dificuldades em se medir o tamanho real da economia informal. A despeito disso, todas as estimativas existentes apontam para uma participação significativa desse segmento na economia nacional como um todo. São abordadas, também, as diversas iniciativas existentes no país, que têm como intuito reduzir a informalidade. Entretanto, observa-se que, apesar do fato de elas terem logrado uma redução de pequena magnitude na participação da informalidade no conjunto da economia ao longo dos anos 2000, esta continua se expandindo em números absolutos. Small businesses have frequently been subject of debates in the contexts of economy as well as public policies. On the other hand, the intermingling between these and the informal economy is undeniable. In this context, the current paper aims to present and analyze the different forms of conceptualization and the results obtained in the many attempts of measuring the informal economy in Brazil. It also seeks to evince that there is not well defined dividing line between what is formal and informal; these realities articulate and complement each other in semiformality. Throughout this study, the difficulties in measuring the real size of informal economy become evident. Nonetheless, all of the existing estimates point to a significant participation of this segment in the national economy as a whole. The many existent initiatives in the country that are aimed at decreasing informality are also examined. However, it is clear that, despite the fact that they have achieved a small decrease in the participation of informality in the whole of the economy through the 21st Century, it is still expanding in absolute numbers.
    Date: 2016–08

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