nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2017‒09‒03
five papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. On the effects of repeated tax amnesties By Sanchez Villalba, Miguel A.
  2. The impact of the shadow economy on aid and economic development nexus in Egypt By Hassan, Mai
  3. Improving tax policy and administration in South-East Asia By Daniel Jeongdae Lee from the Macroeconomic Policy and Financing for Development Division.
  4. The Impact of the Action Plan for Promoting Employment and Combating Unemployment on Employment Informality in Algeria By Souag, Ali; Assaad, Ragui
  5. Russia’s Informal Economic Growth: 1960–1990 By Shida, Yoshisada

  1. By: Sanchez Villalba, Miguel A.
    Abstract: We examine empirically the effect of tax amnesties on long term tax collection when such amnesties are used by a government as a regular source of revenue. We use data from the Tucuman province (Argentina) to test the main hypothesis of the model, namely, that amnesties lower the government’s revenue, as they reduce the penalties and make evasion more profitable. We find, however, that amnesties do not affect the long-term revenue. The other main result is in line with the theoretical predictions: the increase in short-run revenue is temporary and only accelerates the collection of the taxes but does not increase the amount collected. Thus, we conclude that amnesties were used only to obtain a short-run surge in revenue and to avoid more fundamental tax reforms.
    Keywords: tax amnesties; tax evasion
    JEL: C22 H26 H27
    Date: 2017
  2. By: Hassan, Mai
    Abstract: Egypt suffers from low growth rates, increasing unemployment, poverty and a persistent shadow economy. Yet, Egypt is among the top 10 recipients of aid to promote economic development. Given this controversy, the purpose of this study is to examine the impact of the shadow economy on economic development and on aid effectiveness in Egypt from 1976 to 2013. There is a limited number of studies focusing on aid-development nexus for the case of Egypt which are inconclusive of the main channels that influence this nexus. Therefore, this paper adds to the literature by intersecting the shadow economy as an indirect channel affecting the aid-development nexus in Egypt. To this end, the fully modified OLS methodology is applied. The results indicate that the shadow economy has a negative impact on economic development and a diminishing effect on aid effectiveness. Because the effect of a change in aid on income is conditional on the size of the shadow economy in Egypt, it is important to calculate the marginal effect of aid on income for different values of the shadow economy. Based on the calculation of the marginal effect, one can conclude that the effect of aid on income is reversed given the presence of the shadow economy. The persistent existence of the shadow economy poses a major challenge for policy makers due its depressing effect on economic development and on aid effectiveness.
    Keywords: Development aid; shadow economy; FMOLS; Egypt
    JEL: C32 F35 O11 O17
    Date: 2017–08–10
  3. By: Daniel Jeongdae Lee from the Macroeconomic Policy and Financing for Development Division. (United Nations Economic and Social Commission for Asia and the Pacific)
    Abstract: An important function of the government is to collect taxes for the provision of public goods. While a number of South-East Asian economies, such as Indonesia and the Philippines, have relatively low tax revenues as a share of GDP, there is renewed public interest in strengthening tax revenues for better education, healthcare and infrastructure, especially in the context of the recently adopted 2030 Agenda for Sustainable Development. This policy brief discusses how improvements in tax policy and administration could help raise adequate revenues and provides illustrative estimates of ‘potential’ tax revenues.
  4. By: Souag, Ali (University of Mascara); Assaad, Ragui (University of Minnesota)
    Abstract: This paper examines whether the Action Plan for Promoting Employment and Combating Unemployment, a labor market intermediation program adopted by the Algerian government in 2008, reduced the informality of employment in Algeria. Using repeated cross-section data from the Household Survey on Employment for the period from 1997 to 2013, and a difference-in-difference methodology, we estimate whether the Action Plan has reduced the probability that workers are employed informally in enterprises of more than 5 workers – the type of enterprise that is most likely to be directly affected by the Action Plan. Our results show that the Action Plan has in fact contributed to reducing employment informality in such enterprises, but with heterogeneous effects. More precisely, it reduced informality for employees of establishments of 10 workers or more but had no significant effects on informality for those working in enterprises of 5 to 9 workers. Furthermore, when we restrict our estimates to new entrants only, we do not find statistically significant effects.
    Keywords: Algeria, informal employment, labor market programs
    JEL: J08 J48 O17
    Date: 2017–08
  5. By: Shida, Yoshisada
    Abstract: This paper studies the historical GDP of Russia from perspective informal economy. We re-estimate nominal and real informal GDP in the period 1960–1990, using the expenditure approach and declassified archival materials of household budget surveys. The main findings are as follows. First, previously estimated values of Russia’s nominal GDP were underestimated, on average, by about 12.6% for 1960–1990, due to ignoring informal GDP. Second, after including informal GDP, we find that economic growth is 15–39 percentage points lower during this period, which corresponds to differences in the annual growth rate in the range of 0.24–0.38 percentage points.
    Keywords: informal economy, historical statistics, Russia, USSR
    JEL: N14 O17 N24 N27
    Date: 2017–03

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.