nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2017‒08‒20
three papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. The labyrinth of the informal economy: measurement strategies and impacts By Victor Adame; David Tuesta
  2. How Do Entrepreneurial Portfolios Respond to Income Taxation? By Frank M. Fossen; Ray Rees; Davud Rostam-Afschar; Viktor Steiner
  3. El laberinto de la economia informal: estrategias de medicion e impactos By Victor Adame; David Tuesta

  1. By: Victor Adame; David Tuesta
    Abstract: One of the factors of the greatest upheaval to a country’s economic prospects is the substantial presence of the informal economy. The aim of this paper is to articulate a detailed statistical approach to identify the significance of such factors by examining key econometric strategies and availing ourselves of several different samples for over 160 countries.
    Keywords: Financial Inclusion , Global , Working Paper
    JEL: O17 E26
    Date: 2017–08
  2. By: Frank M. Fossen; Ray Rees; Davud Rostam-Afschar; Viktor Steiner
    Abstract: We investigate how personal income taxes affect the portfolio share of personal wealth that entrepreneurs invest in their own business. In a reformulation of the standard portfolio choice model that allows for underreporting of private business income to tax authorities, we show that a fall in the tax rate may increase investment in risky entrepreneurial business equity at the intensive margin, but decrease entrepreneurial investment at the extensive margin. To test these hypotheses, we use household survey panel data for Germany eliciting the personal wealth composition in detail in 2002, 2007, and 2012. We analyze the effects of personal income taxes on the portfolio shares of six asset classes of private households, including private business equity. In a system of simultaneous demand equations in first differences, we identify the tax effects by an instrumental variables approach exploiting tax reforms during our observation period. To account for selection into entrepreneurship, we use changes in entry regulation into skilled trades. Estimation results are consistent with the predictions of our theoretical model. An important policy insight is that lower taxes drive out businesses that are viable only due to tax avoidance or evasion, but increase investment in private businesses that are also worthwhile in the absence of taxes.
    Keywords: Taxation, entrepreneurship, portfolio choice, investment
    JEL: H24 H25 H26 L26 G11
    Date: 2017
  3. By: Victor Adame; David Tuesta
    Abstract: Uno de los factores que mayores trastornos genera a las perspectivas economicas de un pais es la alta presencia de economia informal. El objetivo de este trabajo es realizar una aproximacion estadistica detallada que permita identificar la importancia de estos factores considerando estrategias econometricas relevantes, empleando diferentes muestras de mas de 160 paises.
    Keywords: Documento de Trabajo , Global , Inclusion Financiera
    JEL: O17 E26
    Date: 2017–08

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