nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2017‒10‒29
seven papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Implausible Large Differences in the Sizes of Underground Economies in Highly Developed European Countries? A Comparison of Different Estimation Methods By Friedrich Schneider
  2. International Tax Evasion, State Purchases of Confidential Bank Data and Voluntary Disclosures By Bethmann, Dirk; Kvasnicka, Michael
  3. Dirty money coming home: Capital flows into and out of tax havens By Miethe, Jakob; Menkhoff, Lukas
  4. Tax Refunds and Income Manipulation Evidence from the EITC By Buhlmann, Florian; Elsner, Benjamin; Peichl, Andreas
  5. Does the introduction of non-contributory social benefits discourage registered labour? Testing the impact of pension moratoriums on unregistered employment in Argentina (2003-2015). By Leonardo Eric CALCAGNO
  6. Non-Contributory Health Insurance and Household Labor Supply: Evidence from Mexico By Gabriella Conti; Rita Ginja, Renata Narita
  7. Informalidad laboral y elementos para un salario mínimo diferencial por regiones en Colombia By Luis E. Arango; Luz A. Flórez

  1. By: Friedrich Schneider
    Abstract: In this paper, first, the MIMIC estimation method is described and criticized and due to a double counting problem a correction is suggested. Second, the measurement methods used for National Accounts Statistics – the discrepancy method and two new micro survey methods – are described and a third, a micro method, using a combination of company manager surveys and their knowledge to calibrate the size of the shadow economy in firms, is presented, too. Third, a detailed comparison of the four micro estimation methods with the MIMIC and the corrected MIMIC method are presented. One major result is that the corrected MIMIC method, especially, comes quite close to various types of lately developed micro survey methods.
    Keywords: MIMIC estimation methods, macro and adjusted, micro survey method asking company managers, micro survey method using households’ data, using the consumption-income-gap, comparison of results of size of shadow economy of European countries, shadow economies
    JEL: E26 E01 H26 H32 K42 P24 O17
    Date: 2017
  2. By: Bethmann, Dirk; Kvasnicka, Michael
    Abstract: State purchases of bank data on suspected tax evaders from international tax havens constitute a potential tool to combat international tax evasion. Using self-compiled data for North-Rhine Westphalia on the timing and content of such data acquisitions from whistleblowers and on monthly voluntary disclosures of international tax evasion involving Swiss banks, we show that purchases of data by tax authorities on potential tax evaders have a positive and sizeable effect on voluntary disclosures.
    JEL: H26
    Date: 2017
  3. By: Miethe, Jakob; Menkhoff, Lukas
    Abstract: We use recently released bilateral locational banking statistics of the BIS to show the full circle of international tax evasion via tax havens. White-washed money from tax havens is withdrawn from banks in non-havens if an information treaty is signed. This complements the stylized fact of such a reaction on outbound flows into tax havens. We find different time lags and other plausible structures in these reactions and a puzzling decline of the effect of treaties on capital flows over time.
    JEL: G21 H26
    Date: 2017
  4. By: Buhlmann, Florian (ZEW Mannheim); Elsner, Benjamin (IZA); Peichl, Andreas (Ifo Institute for Economic Research)
    Abstract: Welfare programs are important for reducing poverty but create incentives for recipients to maximize their income by either reducing labor supply or manipulating taxable income. In this paper, we quantify the extent of such behavioral responses for the Earned Income Tax Credit (EITC) in the US. We exploit that US states can set top-up rates, which means that, at a given point in time, workers with the same income receive different tax refunds in different states. Using event studies as well as a border pair design, we document that a raise in the state-EITC leads to more bunching of self-employed tax filers at the first kink point of the tax schedule. While we document a strong relationship up until the Great Recession in 2007, we find no effect thereafter. These findings point to important behavioral responses to what is the largest welfare program in the US.
    Keywords: EITC, tax refunds, income manipulation
    JEL: H20 H24
    Date: 2017–09
  5. By: Leonardo Eric CALCAGNO
    Date: 2017
  6. By: Gabriella Conti; Rita Ginja, Renata Narita
    Abstract: A central topic in the global health agenda is universal health coverage (UHC). The primary goal of social health insurance schemes is to protect beneficiaries from the health and financial consequences of adverse health events. While in this sense there is scope for government intervention in providing insurance, the impacts of UHC on labor markets in developing countries are less clear. We study this issue using the case of Mexico, which introduced in 2002 a non-contributory health insurance scheme directed to the half of the country’s population uncovered by Social Security protection (the Seguro Popular, SP). Since before SP uninsured individuals could only access affordable health care through their employer, the introduction of a non-contributory public health insurance scheme could have resulted in large effects on the labor market. In practice, SP is a transfer(tax) to the informal(formal) sector workers and to the nonemployed. On the one hand, if the value placed on SP benefits is high, the introduction of fully subsidized health insurance can lead to negative impacts on employment and/or formality. On the other hand, wages in equilibrium might compensate the increase in benefits in the informal sector, in which case the impact on formality and employment is ambiguous. We start analyzing the effects of SP on labor market outcomes by exploiting its staggered introduction across municipalities using a difference-in-differences strategy on the Mexican Labor Force Survey data. We show that the implementation of SP in a municipality is associated with an increase in informality by 4% for low-education families with children. Then, to study why the policy change had limited impacts on the labor market, we develop and estimate a novel household search model which incorporates the value of SP as well as the pre-reform valuation assigned to the amenities in the formal sector relative to the alternatives (i.e., informal sector and non-employment), in order to understand whether access to free health services is valued by household members when they make their labor market decisions. Our structural model is able to replicate both the stocks of household types by Social Security coverage and the transitions in and out of employment and between formal and informal jobs in the pre-reform period. The results show that the steady-state marginal willingness to pay for the health insurance coverage provided by SP is very low, amounting to only 1.3%-4.2% of the mean wage in the informal sector. Lastly, using the model to simulate counterfactual scenarios of employment and labor formality under different valuations of the new health system implemented in Mexico, we find that the willingness to pay for SP would have had to be significantly greater than it was to have substantial impacts on the economy.
    Keywords: Health Insurance; Social Security; Informality
    JEL: I13 J33 J42 O17
    Date: 2017–10–23
  7. By: Luis E. Arango (Banco de la República de Colombia); Luz A. Flórez (Banco de la República de Colombia)
    Abstract: Se presenta evidencia de que el salario mínimo en relación con el salario correspondiente al percentil 70 afecta el tamaño del sector informal en las áreas urbanas en Colombia. Dicho efecto se observa en promedio en todas las áreas urbanas. Sin embargo, cuando se analizan las ciudades individualmente, se encuentra que es el efecto del salario mínimo relativo es diferencial; por ejemplo, en Barranquilla es muy bajo mientras que en Popayán, Villavicencio y Neiva es muy alto. Por ello, en estas últimas, más que en otras, parece haber una gran desconexión entre la productividad de la mano de obra menos capacitada y el salario mínimo. Se presentan dos propuestas para introducir un salario mínimo diferencial dependiendo del alejamiento de la informalidad (productividad laboral) de cada ciudad del promedio de 23 ciudades. Se presentan estimaciones del efecto de la actividad económica y los costos no laborales distintos del salario en un sinnúmero de variables del mercado laboral. Classification JEL: J23, J31, J46, J48
    Keywords: Informalidad laboral, productividad laboral, salario mínimo, heterogeneidad regional
    Date: 2017–10

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