nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2017‒10‒01
five papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Evidence-based threat-of-audit letters: do taxpayers respond strategically in a complex environment? By Carlo, Fiorio; Alessandro, Santoro
  2. "Does Voluntary Tax Compliance Increase After Granting Tax Amnesty?" By I Made Sudarma
  3. Informality, Public Employment and Employment Protection in Developing Countries By Yassin, Shaimaa; Langot, François
  4. Financial Inclusion and Women Entrepreneurship: Evidence from Mexico By Fozan Fareed; Mabel Gabriel; Patrick Lenain; Julien Reynaud
  5. Why do financial inclusion policies fail in mobilizing savings from the poor ? Lessons from rural South India * By Jann Goedecke; Isabelle Guérin; Bert D 'Espallier; Govidan Venkatasubramanian

  1. By: Carlo, Fiorio; Alessandro, Santoro
    Abstract: Evidence-based threat-of-audit letters: do taxpayers respond strategically in a complex environment?
    Keywords: Tax Compliance by Businesses, Threat-of-audit letters
    JEL: H26
    Date: 2017–09–26
  2. By: I Made Sudarma (Brawijaya University, Indonesia Author-2-Name: I Nyoman Darmayasa Author-2-Workplace-Name: Bali State Polytechnic, Indonesia)
    Abstract: "Objective – The main objective of this study is to explore the meaning of voluntary tax compliance by a person after they are granted tax amnesty. Methodology/Technique – This research is qualitative research and uses a transcendental phenomenology method. Findings – The results show that tax compliance does not automatically increase after a grant of tax amnesty. The reason for this is the fact that taxpayers wish to avoid being tax audited. Tax amnesty is therefore not yet useful in build trust in the tax authority. Tax authorities need to convince the public that tax amnesty creates justice for all taxpayers. The power of the tax authority is useful to strengthen law enforcement measures. Furthermore, fundamental moral and ethical considerations based on internalization, spirituality and religion tend to improve taxpayers’ honesty. Novelty – The trust and power of a tax authority that is in line with taxpayers’ honesty is fundamental voluntary to tax compliance. The results of this research demonstrate the need for new tax policies to increase voluntary tax compliance."
    Keywords: Moral Ethics; Tax Amnesty; Transcendental Phenomenology; Trust; Voluntary Tax Compliance.
    JEL: H20 H21 M41
    Date: 2017–07–07
  3. By: Yassin, Shaimaa (University of Lausanne); Langot, François (University of Le Mans)
    Abstract: This paper proposes an equilibrium matching model for developing countries' labor markets where the interaction between public, formal private and informal private sectors are taken into account. Theoretical analysis shows that gains from reforms aiming at liberalizing formal labor markets can be annulled by shifts in the public sector employment and wage policies. Since the public sector accounts for a substantial share of employment in developing countries, this approach is crucial to understand the main labor market outcomes of such economies. Wages offered by the public sector increase the outside option value of the workers during the bargaining processes in the formal and informal sectors. It becomes more profitable for workers to search on-the-job, in order to move to these more attractive and more stable types of jobs. The public sector therefore acts as an additional tax for the formal private firms. Using data on workers' flows from Egypt, we show empirically and theoretically that the liberalization of labor markets plays against informal employment by increasing the profitability, and hence job creations, of formal jobs. The latter effect is however dampened or even sometimes nullified by the increase of the offered wages in the public sector observed at the same time.
    Keywords: job search, informality, public sector, Egypt, unemployment, wages, policy interventions
    JEL: E24 E26 J60 J64 O17
    Date: 2017–09
  4. By: Fozan Fareed (OECD); Mabel Gabriel (OECD); Patrick Lenain (OECD); Julien Reynaud (OECD)
    Abstract: Financial inclusion and women entrepreneurship concern policymakers because of their impact on job creation, economic growth and women empowerment. Women in Mexico do engage in paid work but many of them work in the informal sector because they lack opportunities to work in the formal sector. Moreover, financial exclusion rate in Mexico remains the highest amongst OECD countries, affecting women in particular. This paper uses an individual-based panel dataset over the period 2009-2015 to examine the determinants of women entrepreneurship in Mexico and to determine the relationship between women entrepreneurship and financial inclusion across informal and formal work and across economic sectors. The results suggest that financial inclusion is positively linked with entrepreneurship and it can open up economic opportunities for women entrepreneurs. Various financial access points like banking branches, POS terminals, banking agents, ATMs and microfinance banks can be a gateway to the use of additional financial services which can allow businesses development through access to credit facilities. However, the positive relationship between women entrepreneurship and financial inclusion does not hold for women entrepreneurs working in the informal sector or women working in the commerce sector, highlighting lower entry barriers, including financial, in the informal sector and problems pertaining to financial illiteracy. Results also highlight that the probability of a women being an entrepreneur in the informal sector is higher than in the formal sector. Education, age, income, marital status (married or divorced), and income level at the municipality level are amongst other significant determinants which are positively linked with women entrepreneurship. The results also highlight the existence of gender disparity in the status of entrepreneurship across formal and informal work in Mexico. On average, women are about 56% less likely to be entrepreneurs in the formal sector and 63% more likely to be entrepreneurs in the informal sector, as compared to men, after taking into account other relevant individual and municipality level characteristics that are important in explaining entrepreneurship.
    Keywords: financial access, financial exclusion, Financial inclusion, informality, SMEs, women entrepreneurship
    JEL: F14 F23 L16 O24
    Date: 2017–09–27
  5. By: Jann Goedecke (Kristianstad University - Kristianstad University, K.U.Leuven - K.U.Leuven); Isabelle Guérin (CESSMA - Centre d'études en sciences sociales sur les mondes africains, américains et asiatiques - Inalco - Institut National des Langues et Civilisations Orientales - UP7 - Université Paris Diderot - Paris 7 - Institut de recherche pour le développement , IFP - Institut Français de Pondichéry - Ministère des Affaires étrangères et européennes - CNRS - Centre National de la Recherche Scientifique); Bert D 'Espallier (K.U.Leuven - K.U.Leuven); Govidan Venkatasubramanian (IFP - Institut Français de Pondichéry - Ministère des Affaires étrangères et européennes - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Combining multivariate and qualitative analyses, this micro-level study suggests an explanation for the persistence of informal savings in rural South India despite publicly run large-scale programs to promote bank savings. Notably gold, but also ROSCAs and private lending, remain dominant forms of saving. We argue that cultural norms and social institutions such as social class and caste shape the nature, the propensity but also the opportunities to save. Gold serves multiple purposes, which are financial, economical, socio-cultural, and political. Furthermore, we find that Dalits’ (the lowest caste) preference for gold illustrates a relative emancipation of Dalits combined with the maintenance of prohibition related to caste which prevents them to invest in other assets such as land.
    Keywords: political economy, banks, microfinance, India,informal saving, financial inclusion, economic anthropology
    Date: 2016

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