nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2017‒05‒28
six papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Employment and Efficiency Effects of Social Security (SS) and Social Protection (SP) Systems in the Context of an Informal Sector and Market Imperfections: A Conceptual Review By Albert Berry
  2. Incentives and Motives of Workers Employed in the Areas of Formal and Non-Criminal 'Shadow' Economy By Pokida, Andrey; Zybunovskaya, Nataliya
  3. Characterization of Gold Mining Institutions in the Nilgiri-Wayanad Region of India: A Historical-Institutional Perspective By Amalendu Jyotishi
  4. Is there any Induced Demand for Tax Evasion? By Marchese, Carla; Venturini, Andrea
  5. Changing Tax Capacity and Tax Effort of Indian States in the Era of High Economic Growth, 2001-2014. By Mukherjee, Sacchidananda
  6. Tax Administration Reforms in the Caribbean; Challenges, Achievements, and Next Steps By Stephane Schlotterbeck

  1. By: Albert Berry
    Abstract: Most developing countries suffer serious “imperfections “in their labour, capital and product markets; a high level of informality (lack of connection with the state, e.g. non-registration, non-compliance with tax and labour regulations, etc.); and attempts to improve the welfare of specified groups through social security (SS) systems in the formal sector and (increasingly in recent years) through social protection systems (SP) designed to achieve greater overall coverage, e.g. to reach informal workers. Among the main policy issues that arise around the combined existence of these features are how to limit such negative effects as the market imperfections may have, how best to design SS and SP systems in such settings, and whether to pursue formalization be pursued as a policy and if so. The analysis of the impact of SP policies is very complicated and cannot be safely undertaken in a two sector (formal-informal) model, nor in one that assumes labour homogeneity or perfect competition in the product and capital markets. The analysis of any given case is likely to be complicated enough to pose serious barriers to the attainment of reliable conclusions, but is nonetheless worthwhile to narrow the range of uncertainty as to the impact of policy. For labour market functioning to have direct policy implications on the desirability of SP requires that labour allocation between the two (or among the three) sectors will respond to the presence of SP (as in non-queuing cases where the elasticity of formal demand for labour is not close to zero elasticity).
    Keywords: social security, social policy, informality, formalizatio, registration, labour market, capital market, product markets, regulations, market imperfections, economic efficiency
    Date: 2017–04–14
  2. By: Pokida, Andrey (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Zybunovskaya, Nataliya (Russian Presidential Academy of National Economy and Public Administration (RANEPA))
    Abstract: In a scientific report presents results of a study carried out by the enter of social and political monitoring of the School of Public Policy of RANEPA in 2016. The research is devoted to the study of the characteristics of functioning non-criminal "shadow" economy, in particular the incentives and motivations of economic behavior of workers employed in the areas of formal and non-criminal "shadow" economy. The results are compared with the results of opinion polls conducted by the Centre in the previous years on a comparable method. The main conclusions drawn from the results of sociological research, formed the basis for recommendations to improve the mechanism to increase labor and economic activity in the formal economy in Russia, limiting the economic activity in the "shadow" economy.
    Date: 2017–04
  3. By: Amalendu Jyotishi
    Abstract: This paper explores the complex development of gold mining in the Nilgiri-Wayanad region of Southern India, demonstrating how entwined histories disrupt simple taxonomic structures of ‘formality' and ‘informality.' Drawing on the long history of gold mining in the region that dates back to the 1830's, this paper presents a counter-example to the conventional view that institutions develop in a trajectory of informality to formality. To do this, the article identifies three distinct phases of development in the gold mining industry of this region that mark and encompass shifts in governance of the area, global economic trends and commercial investment, property rights, government funding, influx of repatriate communities, and other social issues in the local economy. We conclude based on this analysis that institutions in the region have evolved from formal-artisanal to formal-industrial and then to informal small-scale.
  4. By: Marchese, Carla; Venturini, Andrea
    Abstract: In this paper we consider amoral taxpayers who access amoral tax preparers in order to receive help in evading taxes. Taxpayers are aware of having a biased perception of the audit probability, but are unable to correct such bias without the help of a tax preparer. The market for tax preparation, characterized by imperfect competition, is described according to the conjectural variation approach. We show that according to the direction of the bias the tax preparer can suggest either a larger or a smaller evasion with respect to the one that the taxpayer would have implemented without the advice, resulting in an evasion smaller or larger than that observed in tax reports of unbiased taxpayers. Such ambiguity provides a motivation for the ambivalent attitudes of tax administrations towards tax preparers. It also turns out that sanctions on taxpayers are more effective than sanctions on tax preparers in order to deter tax evasion.
    Date: 2017–05
  5. By: Mukherjee, Sacchidananda (National Institute of Public Finance and Policy)
    Abstract: Growing demand for public expenditures, limitations in expanding fiscal space and limited scope to deviate from common harmonized tax system under the proposed Goods and Services Tax (GST) regime may induce the states to look for opportunities to xpand revenue mobilization through alternative channels (e.g. non-tax revenue mobilization). An assessment of the existing tax efficiency (or tax effort) and strengthening tax administration could be one of such alternatives available for states to pursue. Tax administration is as important as tax base to augment revenues of a state. Efficiency of tax administration helps a state to achieve a stable tax regime which is conducive for introduction of tax reforms measures like GST. Buoyancy of tax revenues of a state is not only dependent on growth in tax base and structure of taxes but also on the state of tax administration. Many papers have been written to estimate tax effort of Indian states. Taking this exercise to the next level, this paper focuses on measuring tax effort and identifying factors that explain variations in the tax effort across states. In measuring tax potential, an attempt has been made to differentiate between factors that determine the tax base and factors that constrain the state from utilizing the available base. The exercise looks at comprehensive revenue collection under Value Added Tax of general category states for the period 2001-02 to 2013-14.
    Keywords: Tax capacity ; Tax efficiency ; Value Added Tax (VAT) ; Stochastic Frontier Approach ; Panel Data Analysis ; States of India
    JEL: H21 H71 H77
    Date: 2017–05
  6. By: Stephane Schlotterbeck
    Abstract: Over the past decade, governments in the Caribbean region have introduced the value-added tax (VAT) to modernize their tax system, rapidly mobilize revenue and reduce budget deficits. This paper analyzes VAT performance in the region and concludes that while it has boosted revenues, the VAT has not reached its potential. Intended as a broad-based tax with limited exemptions, a single rate and zero-rating confined to exports, the VAT's design often lacks these characteristics. The paper also finds that although tax administration reforms can boost revenues, countries have just started to address organizational inefficiencies, data integrity issues, and operational ineffectiveness. These reforms need to intensify in order to have a more significant impact on compliance and revenue.
    Keywords: Antigua and Barbuda;Asia and Pacific;Bahamas, The;Barbados;Dominica;Dominican Republic;Grenada;Haiti;Jamaica;Western Hemisphere;Saint Kitts and Nevis;Saint Lucia;Saint Vincent and the Grenadines;Trinidad and Tobago;Tax administratuion reforms, General
    Date: 2017–04–04

This nep-iue issue is ©2017 by Catalina Granda Carvajal. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.