nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2017‒04‒23
seven papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Do Payroll Tax Breaks Stimulate Formality? Evidence from Colombia’s Reform By Adriana Kugler; Maurice Kugler; Luis Omar Herrera Prada
  2. Gender, Informal Employment and Trade Liberalization in Mexico By Pamela Bombarda; Sarra Ben Yahmed
  3. Sectoral Estimates of Informality: A New Method and An Application to Turkish Economy By Ceyhun Elgin; Burak Sezgin
  4. TFP Growth in Turkey Revisited: The E§ect of Informal Sector By Orhan Erem Atesagaoglu; Ceyhun Elgin; Oðuz Öztunalý
  5. Fiscal decentralization and the shadow economy By Petr Janský; Miroslav Palanský
  6. A Segmented Markets Model to Teach Analysis of Monetary Policy Shocks in Developing Economies By Waknis, Parag
  7. Tre grupper skatteytere i søkelyset: Har de ulike kjennetegn? By Andersson, Jonas; Lillestøl, Jostein

  1. By: Adriana Kugler; Maurice Kugler; Luis Omar Herrera Prada
    Abstract: Alternative work arrangements have grown rapidly around the world. In Latin America, these alternative work arrangements have long been part of the labor market and have continued to grow. The informal sector grew rapidly in Latin America over the past few decades comprising up to half of the working population in many countries. Some attribute the growth in alternative work arrangements and informality to regulations and taxes, while others argue that it is precisely the lack of enforcement of regulations that allows unprotected employment arrangements to flourish. We examine whether reducing taxes associated with employment stimulates formal sector employment. We exploit the fact that the Tax Reform introduced in Colombia in 2012 affected only certain types of workers and not others. In particular, workers earning less than 10 minimum wages (MW) and self-employed workers with more than 2 employees experienced a reduction of payroll taxes of 13.5% between 2013 and 2014. We use the Colombian Household Surveys, Social Security records and the Monthly Manufacturing Sample to conduct difference-in-difference analyses of the reform. We find evidence of increased formal employment for the affected groups after the reform using all three datasets. We find that the probability of formal employment and the likelihood of transitioning into registered employment increased for the affected groups after the reform. We also find that the level and share of permanent employment relative to temp employment grew after the reform for those earnings less than 10 MW. The results are greatest for those in smaller firms and those earnings close to the MW.
    JEL: H2 J2 J24 J31
    Date: 2017–04
  2. By: Pamela Bombarda; Sarra Ben Yahmed (Université de Cergy-Pontoise, THEMA)
    Abstract: We study how trade liberalization a ects labour reallocation in formal and informal jobs across gender. We link the Mexican labour force survey with data on tariffs at the 4-digit level from 1993 to 2001, and find that a tariff reduction increases the probability of holding a formal job for both men and women within industries. Constructing a regional tarif measure, we show that local effects of changes in trade policy differ between gender and industries. At the regional level, trade liberalization decreases the probability of working formally for women, but increases the probability of working formally for high- skilled men. Then, controlling for sectoral differences, we find that in the manufacturing sector, men benefit more from the formalization of jobs induced by trade liberalization. While in the service sector, workers, especially low- skilled women, have higher chances to work informally.
    Keywords: Informality, trade liberalization, gender, Mexico.
    JEL: F13 F16 J16 J21
    Date: 2017
  3. By: Ceyhun Elgin; Burak Sezgin
    Date: 2017–02
  4. By: Orhan Erem Atesagaoglu; Ceyhun Elgin; Oðuz Öztunalý
    Date: 2017–01
  5. By: Petr Janský; Miroslav Palanský
    Abstract: In this paper we use the new Government Revenue Dataset to analyse fiscal decentralization. We find that developed countries are on average more decentralized than developing countries and that Asia, Europe and North America are among the most fiscally decentralized regions. In our econometric analysis, we examine the relationship between fiscal decentralization and the shadow economy. We hypothesize that decentralization can negatively or positively affect the size of the shadow economy, increasing or decreasing its size, and that this effect can vary according to a country’s level of development. We first replicate earlier results of cross-country analysis and proceed by estimating a fixed effects model, which provides evidence of a relatively robust and statistically significant relationship between tax revenue decentralization and the size of the shadow economy. We find that in developing countries a higher level of decentralization is associated with an increase in the size of the shadow economy, while in developed countries the opposite effect prevails.
    Date: 2016
  6. By: Waknis, Parag
    Abstract: The standard undergraduate textbook models in macroeconomics like the IS-LM/AD-AS model are not disaggregated enough to understand the effects of monetary policy shocks in developing economies typically characterized by substantial informality, and goods and financial markets segmentation. In this paper, I present a version of a segmented markets model based on Williamson (2009, 2011) that could be used as an effective alternative. I demonstrate the use of the framework by analyzing the effects of demonetization- a substantial reduction in the availability of outside money- in a developing country setting.
    Keywords: segmented markets, developing countries, demonetization, economic education, informal markets, undergraduate macroeconomics.
    JEL: A22 E42 O17
    Date: 2017–03–28
  7. By: Andersson, Jonas (Dept. of Business and Management Science, Norwegian School of Economics); Lillestøl, Jostein (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: This report analyzes data for three groups of taxpayers in scrutiny of the tax authorities: Taxpayers who, after a tax amnesty, have voluntary come forward with previous unreported taxable income or wealth abroad, taxpayers where there exist automatic abroad control scheme and taxpayers who have been assigned penalty tax. A number of potential key characteristics are selected, and the groups are compared against one another and with a control group of ordinary taxpayers, with the objective to uncover differences between the groups. Three different methods of analysis are used: Simple categorization, correspondence analysis and classification trees. They are of explorative nature and suitable for graphical presentation of results. A comparison of results, and some advantages and disadvantages of the three methods are discussed, in relation to the ambition level: Find the characteristics that separates the groups, or more, establish rules for classification of individuals with unknown membership.
    Keywords: Taxpayers; tax amnesty; simple categorization; correspondence analysis; classification trees
    JEL: C00 H20
    Date: 2017–03–31

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