nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2017‒06‒18
four papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Tax evasion, intrinsic motivation, and the evolutionary effects of tax reforms By Fabio Lamantia; Mario Pezzino; Fabio Tramontana
  2. Behavioral insights and business taxation: Evidence from two randomized controlled trials By Biddle, Nicholas; Fels, Katja; Sinning, Mathias
  3. Structural Reform Packages, Sequencing, and the Informal Economy By Zsuzsa Munkacsi; Magnus Saxegaard
  4. Cultural Preferences and the Choice between Formal and Informal Financing By Bedendo, Mascia; Garcia-Appendini, Emilia; Siming, Linus

  1. By: Fabio Lamantia; Mario Pezzino; Fabio Tramontana
    Date: 2017
  2. By: Biddle, Nicholas; Fels, Katja; Sinning, Mathias
    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 letters (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 reduced the proportion of default assessments raised by the ATO significantly, suggesting that businesses are responsive to certain types of nudges.
    Keywords: tax compliance,business taxation,behavioral insights,nudging
    JEL: C93 H25 H26
    Date: 2017
  3. By: Zsuzsa Munkacsi; Magnus Saxegaard
    Abstract: This paper explores the macroeconomic impacts of labor and product market deregulation using a small open-economy model with formal and informal markets. We examine both the long-run effects and the transition towards the post-reform equilibrium, while our main focus are reform packages and sequencing. The unofficial sector is a major determinant of the sign, and, in particular, the magnitude of responses. South Africa, an emerging country, is considered when Bayesian estimating the model. Regarding the long run, both labor and product market reforms considerably increase output, although labor market reforms are more successful in decreasing unemployment. Nevertheless, there are short-term costs, for example, a decrease in household consumption, net exports or output, or a decrease in competition. Combining reforms, especially with product market deregulation, are good at reducing short-term costs. Finally, concerning the speed of adjustment, it is usually better to start with a labor market reform.
    Date: 2017–05–26
  4. By: Bedendo, Mascia; Garcia-Appendini, Emilia; Siming, Linus
    Abstract: This paper documents significant differences in the financing structure of small firms with managers of diverse cultural backgrounds. To separate the effect of culture from other factors that affect the financing structure of firms, we exploit cultural heterogeneity within a geographical area with shared regulations, institutions, and macroeconomic cycles. Our findings suggest that there exist significant differences in the culturally embedded preferences towards the use of formal and informal sources of financing (bank loans and trade credit). Our results are robust to alternative explanations based on potential differences in credit constraints and in the distribution of cultural origins across industrial sectors, trading partners, and headquarters location.
    Keywords: Managerial cultural origin, Informal financing, Trade credit, Small firm financing
    JEL: Z10 G32 M14
    Date: 2017–05

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