nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2017‒06‒11
four papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Behavioral Insights and Business Taxation: Evidence from Two Randomized Controlled Trials By Biddle, Nicholas; Fels, Katja; Sinning, Mathias
  2. Factors Affecting Revenue Estimates of Tax Compliance Proposals: Working Paper 2016-05 By Janet Holtzblatt; Jamie McGuire
  3. Eliciting Permanent and Transitory Undeclared Work from Matched Administrative and Survey Data By Elek, Peter; Köllő, J&aacutenos
  4. Credit and Saving Constraints in General Equilibrium: Evidence from Survey Data By Catalina Granda; Franz Hamann; Cesar E. Tamayo

  1. By: Biddle, Nicholas (Australian National University); Fels, Katja (Ruhr University Bochum); Sinning, Mathias (Australian National University)
    Abstract: This paper presents the findings of two Randomized Controlled Trials (RCTs) that were conducted in collaboration with the Australian Taxation Office (ATO). The first trial tests the effect of changes to let-ters (timing, social norms, color, and provision of information about charitable donations) on response rates of businesses, the timing of payments and the amount of tax debt payments. The second trial consists of two parts. The first part aims to raise awareness of the relevance of tax debt payment by changing internal guidelines used by field auditors. The second part focuses on studying the effect of changing the phone script used by desk auditors to offer assistance with payment arrangements and simplifying a follow-up letter. The findings of the first trial indicate that none of the treatments had a significant effect on any of the outcome measures considered. In contrast, the results of the second trial indicate that changing the phone script of desk auditors and simplifying the follow-up letter re-duced the proportion of default assessments raised by the ATO significantly, suggesting that business-es are responsive to certain types of nudges.
    Keywords: tax compliance, business taxation, behavioral insights, nudging
    JEL: C93 H25 H26
    Date: 2017–05
  2. By: Janet Holtzblatt; Jamie McGuire
    Abstract: This paper examines various factors that affect estimates made by the Congressional Budget Office and the staff of the Joint Committee on Taxation of the budgetary savings from tax compliance proposals. Affecting the current law baseline, against which proposed changes are measured, are the size of the tax gap and the amount of Internal Revenue Service (IRS) resources. Other considerations that affect the revenue estimates for either appropriation proposals or changes to the tax code include the distinction between detection and deterrence, the budget scorekeeping guidelines, and the
    JEL: H20
    Date: 2016–11–29
  3. By: Elek, Peter (Eötvös Lorand University); Köllő, J&aacutenos (Hungarian Academy of Sciences)
    Abstract: We study the undeclared work patterns of Hungarian employees in relatively stable jobs, using a panel dataset that matches individual-level self-reported Labour Force Survey data with administrative rec-ords of the Pension Directorate for 2001–2006. We estimate the determinants of undeclared work us-ing Heckman-type random-effects panel probit models, and develop a two-regime model to separate permanent and transitory undeclared work, where the latter follows a Markov chain. We find that about 6-7 per cent of workers went permanently unreported for six consecutive years, and a further 4 per cent were transitorily unreported in any given year. The models show lower reporting rates – es-pecially in the permanent segment – among males, high-school graduates, those in agriculture and transport, various forms of atypical employment, and small firms. Transitory non-reporting may be partly explained by administrative records missing for technical reasons. The results suggest that (i) the 'aggregate labour input method' widely used in Europe can indeed be a simple yet reliable tool to es-timate the size of informal employment, although it slightly overestimates the true magnitude of black work (ii) the long-term pension consequences of undeclared work are substantial because of the high share of permanent non-reporting.
    Keywords: undeclared work, labour input method, matched administrative-survey data, random-effects panel probit with endogenous selection, Markov chain
    JEL: C23 C25 H26 J46
    Date: 2017–05
  4. By: Catalina Granda; Franz Hamann (Banco de la República de Colombia); Cesar E. Tamayo
    Abstract: In this paper, we build a heterogeneous agents-dynamic general equilibrium model wherein saving constraints interact with credit constraints. Saving constraints in the form of fixed costs to use the financial system lead households to seek informal saving instruments (cash) and result in lower aggregate saving. Credit constraints induce misallocation of capital across producers that in turn lowers output, productivity, and the return to formal financial instruments. We calibrate the model using survey data from a developing country where informal saving and credit constraints are pervasive. Our quantitative results suggest that completely removing saving and credit constraints can have large effects on saving rates, output, TFP, and welfare. Moreover, we note that a sizable fraction of these gains can be more easily attained by a mix of moderate reforms that lower both types of frictions than by a strong reform on either front. Classification JEL: E21, E44, G21, O11, O16.
    Keywords: saving constraints, credit constraints, financial inclusion, misallocation, saving, formal and informal financial markets.
    Date: 2017–06

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