nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2017‒02‒12
six papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. The deterrence effect of real-world operational tax audits By Gabriele, Mazzolini; Laura, Pagani; Alessandro, Santoro;
  2. How does petty corruption affect tax morale in sub-Saharan Africa? An empirical analysis By Björn Jahnke
  3. On large-scale money finance in the presence of black markets: the case of the Japanese economy during and after World War II By SAITO, Makoto
  4. Demonetization and Its Impact on Employment in India By Pawan Kumar
  5. Institutionalizing segregation Conditional cash transfers and employment choices By María Gabriela Palacio
  6. Microcredit: Points of Promise By Field, Erica; Holland, Abraham; Pande, Rohini

  1. By: Gabriele, Mazzolini; Laura, Pagani; Alessandro, Santoro;
    Abstract: We use a large administrative tax-returns panel dataset merged with tax audit database to estimate the effect of real-world operational tax audits on subsequent tax behavior. Our identification strategy and the institutional setting that we consider enable us to address potential endogeneity related to non-random selection of taxpayers to be audited. We find a positive and lasting effect of audits on subsequent reported income. However, in line with theoretical predictions, taxpayers do not increase tax compliance when the tax authority does not assess a positive additional income. Our results are robust to a variety of specifications and samples.
    Keywords: Tax Compliance, Administrative Panel Data, Tax Audits
    JEL: H26 C23 C55
    Date: 2017–02–03
  2. By: Björn Jahnke
    Abstract: Revenues from taxation gain importance to finance economic development in sub-Saharan Africa. Extortion of bribes by public officials can provide one obstacle for tax compliance. This paper uses micro-level data from the Afrobarometer to analyse how petty corruption erodes tax morale. A mediation analysis shows that petty corruption directly reduces tax morale but also diminishes trust in the tax department and hence indirectly affects tax morale. The effect on tax morale is more severe in countries and regions where fewer people are affected by petty corruption and becomes insignificant if extortion of bribes is particularly prevalent.
    Keywords: corruption, tax morale, economic development, mediation analysis, regional disaggregation
    Date: 2017
  3. By: SAITO, Makoto
    Abstract: This paper explores the alternative role of large-scale money finance as a fiscal instrument for financing indirectly from black markets when an economy is heavily controlled. It demonstrates that (1) in the Japanese national accounts, aggregate expenditure exceeded aggregate income by income leakages to black markets under the strict price control of the wartime and postwar years 1937-1949, and (2) in order to cover a financial shortage resulting from such income leakages, private agents bartered directly with illegal dealers, but the government let the Bank of Japan (BoJ) underwrite public bonds instead of dealing directly with formal/poor agents or illegitimate/rich agents. The BoJ notes issued to the government were eventually held as a means to conceal income by illegal dealers. Some policy implications for currency reforms are also explored with consideration for the fact that the emergence of black markets necessitated the BoJ's direct underwriting.
    Keywords: money finance, wartime finance, price controls, black markets, national accounts, statistical discrepancies
    Date: 2017–01
  4. By: Pawan Kumar
    Abstract: On November 08, the sudden announcement to demonetization the high denomination currency notes sent tremors all across the country. Given the timing, and socioeconomic and political repercussions of the decision, many termed it a financial emergency. Given high proportion of these notes in circulation, over 86 percent, it led to most economic activities, particularly employment, affected in a big way. Political parties, however, seemed divided on the issue, i.e. those in favor of the decision feel it will help to curb the galloping size of black money, fake currency, cross boarder terrorism, etc. In sharp contrast, the others believe it is a purely misleading, decision, based on no or poor understanding of black economy, and hence is only politically motivated in wake of the assembly elections due in a couple of states.
    Date: 2017–02
  5. By: María Gabriela Palacio
    Abstract: Some claim that certain forms of social protection, conditional cash transfers in particular, result in perverse incentives for recipients in order to stay eligible for receiving benefits. This notion has a bearing on the design of social protection programmes and may undermine the political support for these programmes. This paper analyses Ecuador.s conditional cash transfer programme, the Bono de Desarrollo Humano. The key finding is that concerns about perverse incentives appear largely misplaced. By examining broader patterns of institutionalization of occupational gender segregation, the role of cash transfers is found to be trivial to the deepening of informality and inactivity among recipients.
    Keywords: cash transfers, informality, employment, segregation, Ecuador
    Date: 2016
  6. By: Field, Erica (Duke University); Holland, Abraham (Harvard Institute for Quantitative Social Science, Harvard University); Pande, Rohini (Harvard University)
    Abstract: A majority of the world's impoverished lack adequate access to financial services. Typically, formal banks do not target the poor because lending without collateral is considered too risky. Poor households seeking credit are subsequently forced into informal markets where the prices are high, the quantities limited, and the methods of insuring repayment can be brutal.
    Date: 2016–09

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