nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2016‒12‒18
five papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. The Anatomy of Behavioral Responses to Social Assistance when Informal Employment is High By Marcelo Bergolo; Guillermo Cruces
  2. From 'precarious informal employment' to 'protected employment' : the 'positive transitioning effect' of trade unions By Serrano, M. R.; Xhafa, Edlira
  3. Economic Transformation in Africa from the Bottom Up: Evidence from Tanzania By Xinshen Diao; Josaphat Kweka; Margaret McMillan
  4. OPTIMAL TAXATION AND PUBLIC PROVISION FOR POVERTY REDUCTION By Kanbur, Ravi; Pirttila, Jukka; Tuomala, Matti; Ylinen, Tuuli
  5. De cartoneros a recicladores urbanos. El rol de las políticas locales en mejorarla sustentabilidad de los recolectores de base By Pablo Navarrete-Hernández

  1. By: Marcelo Bergolo (IECON-UDELAR, CEDLAS-FCE-UNLP and IZA); Guillermo Cruces (CEDLAS-FCE-UNLP, CONICET and IZA)
    Abstract: The disincentive effects of social assistance programs on registered (or formal) employment are a first order policy concern in developing and middle income countries. Means tests determine eligibility with respect to some income threshold, and governments can only verify earnings from registered employment. The loss of benefit at some level of formal earnings is an implicit tax – a notch – that results in a strong disincentive for formal employment, and there is extensive evidence on its effects. We study an income-tested program in Uruguay and extend this literature by developing an anatomy of the behavioral responses to this program and by establishing its welfare implications in full. Our identification strategy is based on a sharp discontinuity in the program’s eligibility rule. We rely on information on the universe of applicants to the program for the period 2004-2012 (about 400,000 individuals) from the program’s records, from administrative data on registered employment from the social security administration, and from a complementary follow-up survey with information on informal work. We construct the anatomy of the program’s effects along four dimensions. First, we establish that, as predicted by the theory, beneficiaries respond to the program’s incentives by reducing their levels of registered employment by about 8 percentage points. Second, we find substantial heterogeneity in these effects: the program induces a larger reduction of formal employment for individuals with a medium probability to be a registered employee, suggesting some form of segmentation – those with a low propensity to work formally do not respond to the financial incentives of the program, probably because they have limited opportunities in the labor market to begin with. Third, the follow-up survey allows us to establish that the fall in registered employment is due to a larger extent (about two thirds) to an increase in unregistered employment, and to a lesser extent (about one third) to a shift towards non-employment. Fourth, we find an elasticity of participation in registered employment of about 1.7. These results imply a deadweight loss from the behavioral responses to the program of about 3.2% of total registered labor income.
    JEL: H31 I38 J22 O17
    Date: 2016–11
  2. By: Serrano, M. R.; Xhafa, Edlira
    Keywords: precarious employment, informal workers, employment security, trade union role, case study, Brazil, India, Israel, Korea R, Nepal, Nigeria, Philippines, UK, Zambia
    Date: 2016
  3. By: Xinshen Diao; Josaphat Kweka; Margaret McMillan
    Abstract: At roughly 4% per annum, labor productivity in Tanzania has grown more rapidly over the past 12 years than at any other time in recent history. Employment growth has also been strong keeping up with population growth at roughly 2.5 percent per annum; the bulk of employment growth (90%) has been in the non-agricultural sector. However, the vast majority of this non-agricultural employment growth has occurred in the informal sector. Using Tanzania’s first nationally representative survey of micro, small and medium sized enterprises - we show that firms in the informal sector contributed roughly half a percentage point to economy-wide labor productivity growth in Tanzania between 2002 and 2012. However, virtually all of the labor productivity growth contributed by informal firms came from a small subset of firms we call the in-between firms. We consider attributes of the in-between firms that could be used for targeting financial and business services to firms with the potential to grow. We find two salient characteristics of firms in the in-between sector that might lend themselves to targeting – their owners are more likely to keep written accounts and they are more likely to keep their savings in formal bank accounts.
    JEL: O4 O55
    Date: 2016–12
  4. By: Kanbur, Ravi; Pirttila, Jukka; Tuomala, Matti; Ylinen, Tuuli
    Abstract: The existing literature on optimal taxation typically assumes there exists a capacity to implement complex tax schemes, which is not necessarily the case for many developing countries. We examine the determinants of optimal redistributive policies in the context of a developing country that can only implement linear tax policies due to administrative reasons. Further, the reduction of poverty is typically the expressed goal of such countries, and this feature is also taken into account in our model. We derive the optimality conditions for linear income taxation, commodity taxation, and public provision of private and public goods for the poverty minimization case, and compare the results to those derived under a general welfarist objective function. We also study the implications of informality on optimal redistributive policies for such countries, and comment on the potential for minimum wage regulation. The exercise reveals non-trivial differences in optimal tax rules under the different assumptions. The derived formulae also capture the sufficient statistics that the governments need to pay attention to when designing poverty alleviation policies.
    Keywords: Redistribution, income taxation, commodity taxation, public good provision, poverty, Agricultural and Food Policy, Food Security and Poverty, H21, H40, O12,
    Date: 2015–07
  5. By: Pablo Navarrete-Hernández
    Abstract: Las políticas locales enfocadas a la economía informal, en general, ya los recolectores, en particular, están basadas en cuatro aproximaciones: (1)Dua-lista, de represión en contra de la actividad, producto de la preservación de la po-breza y de la reducción del crecimiento económico; (2)Estructuralista, enfocadasen reforzar las organizaciones y mejorar la negociación de precios; (3)Neoliberal,dirigida a promover la actividad a través de la legalización y el libre mercado,y (4)Co-producción, que considera un fuerte apoyo de las políticas locales paramejorar la productividad de la actividad. Son escasos los estudios -cualitativos y/ocuantitativos- que comparen estas políticas urbanas. Este estudio evalúa la vera-cidad de la caracterización de la economía informal y el impacto de las políticaslocales que estas teorías recomiendan aplicar. Los resultados obtenidos del estudiomuestran una asociación positiva entre el apoyo local y el incremento de la sosteni-bilidad de los recicladores de base en cuanto a su crecimiento económico, equidadsocial, protección medioambiental y reducción de las externalidades negativas.
    Keywords: desarrollo local; economía informal; reciclaje local; recicladores.
    JEL: E26 J48 O17 Q01
    Date: 2016

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