nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2017‒02‒05
four papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. The intergenerational causal effect of tax evasion: Evidence from the commuter tax allowance in Austria By Wolfgang Frimmel; Martin Halla; Jörg Paetzold
  2. Who is audited? Experimental study on rule-based tax auditing schemes By Yoshio Kamijo; Takehito Masuda; Hiroshi Uemura
  3. Deposit Flight and Capital Controls: A Tale from Greece By Michalis Rousakis; Romanos Priftis
  4. Wage Profiles in the Japanese Dual Labor Market By Hiroshi Teruyama; Hiroyuki Toda

  1. By: Wolfgang Frimmel; Martin Halla; Jörg Paetzold
    Abstract: Does tax evasion run in the family? To answer this question, we study the case of the commuter tax allowance in Austria. This allowance is designed as a step function of the distance between the residence and the workplace, creating sharp discontinuities at each bracket threshold. The distance to these brackets is a strong determinant of compliance since it corresponds to the probability of detection. The match of different administrative data sources allows us to observe actual compliance behavior at the individual level across two generations. To identify the intergenerational causal effect in tax evasion behavior, we use the paternal distance-to-bracket as an instrumental variable for paternal compliance. We find that paternal non-compliance increases children's non-compliance by about 20 percent.
    Keywords: tax evasion, tax morale, intergenerational correlation, intergenerational causal effect
    Date: 2017–01
  2. By: Yoshio Kamijo (School of Economics and Management, Kochi University of Technology); Takehito Masuda (Institute of Economic Research, Kyoto University); Hiroshi Uemura (School of Economics and Management, Kochi University of Technology)
    Abstract: In this study, we employ a game-theoretic framework to formulate and analyze a number of tax audit schemes. We then test the theoretical predictions in a laboratory experiment. We compare audit schemes based on three audit rules: the random rule, cut-off rule, and lowest income reporter audited rule. While the cut-off rule is known to be optimal in theory, it has not thus far been examined in a controlled laboratory experimental setting. Contrary to the theory, the lowest income reporter audited rule yielded higher compliance behavior than the optimal cut-off rule in the experiment, even after controlling for social norms regarding tax payment perceived by the subjects. This empirical finding is practically important because the tax authorities in most countries assign higher priority to enhancing tax compliance.
    Keywords: audit scheme; tax evasion; laboratory experiment; cut-off rule; lowest income reporter audited rule
    JEL: C91 C92 D81 H26
    Date: 2017–01
  3. By: Michalis Rousakis; Romanos Priftis
    Abstract: Abstract This paper presents an analytical narration of the later stages of the Greek crisis, focusing on two key events that unfolded during 2014-2015 and set Greece apart from other episodes of sovereign debt crises: the risk of Grexit and the imposition of capital controls on the banking sector. To account for them both, we extend the standard small open economy environment along three dimensions. First, we allow for an informal sector. Second, we allow for a richer menu of assets that include cash, which is needed for informal consumption and is costly to hold. Third, we introduce a banking sector that turns households' deposits into capital. We show that a risk of Grexit leads households to run down their deposits to the detriment of bank balance sheets, increase their demand for cash, and increase their consumption whilst reallocating it towards formal goods. As evidenced by the data capital controls mitigate the deposit ight and reinforce the switch of consumption to formality.
    Keywords: Capital controls, small open economy, exit from a currency union, cash, informal economy, financial intermediaries, Greece
    JEL: E2 E4 F41 G11 G28
    Date: 2017–01–25
  4. By: Hiroshi Teruyama (Institute of Economic Research, Kyoto University); Hiroyuki Toda (Institute of Economic Research, Kyoto University, Institute of Social and Economic Research, Osaka University)
    Abstract: This study examines the dual structure of wage formation in regular and non-regular employment sectors in Japan. By using data from a series of surveys conducted in the Tokyo metropolitan area during 2002--2014, two sectoral wage functions and an employment status determination function are estimated simultaneously. The estimated results reveal several facts regarding the new era of the Japanese dual labor market. While the wages of regular workers rise with years of tenure and external experience, those of non-regular workers increase only with the latter. The wage increases owing to experience are of a similar magnitude between employment statuses (except for female regular workers), and the firm-size and educational-background premiums exist only in the regular employees' wages. The study also shows that the slopes of regular workers' wage-tenure profiles have been rather stable for more than 10 years since the early 2000s.
    Keywords: dual labor market, wage profiles, non-regular workers, Japanese labor market, switching regression model
    JEL: J31 J42 J70 C34
    Date: 2017–01

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