nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2017‒12‒03
six papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Tax compliance by firms and audit policy By Bayer, Ralph; Cowell, Frank A.
  2. Tax morale and the role of social norms and reciprocity - Evidence from a randomized survey experiment By Philipp Doerrenberg; Andreas Peichl
  3. Tax farming redux: experimental evidence on performance pay for tax collectors By Khan, Adnan Q.; Khwaja, Asim I.; Olken, Benjamin A.
  4. Living on the Margins of Development: Domestic Women Workers By Tewathia, Nidhi
  5. Introduction: Globalization, African Workers and the Terms of Inclusion By Meagher, Kate; Manna, Laura; Bolt, Maxim
  6. Addressing developmental needs through energy access in informal settlements By Subbiah, Adritha; Mansoor, Sahar; Misra, Rachita; Jaffer, Huda; Tiwary, Raunak

  1. By: Bayer, Ralph; Cowell, Frank A.
    Abstract: Firms are usually better informed than tax authorities about market conditions and the potential profits of competitors. They may try to exploit this situation by under-reporting their own taxable profits. The tax authority could offset firms’ informational advantage by adopting “smarter” audit policies that take into account the relationship between a firm׳s reported profits and reports for the industry as a whole. Such an audit policy will create an externality for the decision makers in the industry and this externality can be expected to affect not only firms׳ reporting policies but also their market decisions. If public policy takes into account wider economic issues than just revenue raising what is the appropriate way for a tax authority to run such an audit policy? We develop some clear policy rules in a standard model of an industry and show the effect of these rules using simulations.
    Keywords: Tax compliance; evasion; oligopoly
    JEL: J1
    Date: 2016–03–01
  2. By: Philipp Doerrenberg; Andreas Peichl
    Abstract: We present the first randomized survey experiment in the context of tax compliance to assess the role of social norms and reciprocity for intrinsic tax morale. We find that participants in a reciprocity treatment have significantly higher tax morale than those in a social-norm treatment. This suggests that a potential backfire effect of social norms is outweighed if the consequences of violating the social norm are made salient. We further document the anatomy of intrinsic motivations for tax compliance and present first evidence that previously found gender effects in tax morale are not driven by differences in risk preferences.
    Keywords: Tax compliance, tax evasion, instrinsic motivation, tax morale, social norms, reciprocity
    JEL: H20 H32 H50 C93
    Date: 2017
  3. By: Khan, Adnan Q.; Khwaja, Asim I.; Olken, Benjamin A.
    Abstract: Performance pay for tax collectors has the potential to raise revenues, but might come at a cost if it increases the bargaining power of tax collectors vis-à-vis taxpayers. We report the first large-scale field experiment on these issues, where we experimentally allocated 482 property tax units in Punjab, Pakistan, into one of three performance pay schemes or a control. After two years, incentivized units had 9.4 log points higher revenue than controls, which translates to a 46% higher growth rate. The scheme that rewarded purely on revenue did best, increasing revenue by 12.9 log points (64% higher growth rate), with little penalty for customer satisfaction and assessment accuracy compared to the two other schemes that explicitly also rewarded these dimensions. The revenue gains accrue from a small number of properties becoming taxed at their true value, which is substantially more than they had been taxed at previously. The majority of properties in incentivized areas in fact pay no more taxes, but instead report higher bribes. The results are consistent with a collusive setting in which performance pay increases collectors’ bargaining power over taxpayers, who have to either pay higher bribes to avoid being reassessed or pay substantially higher taxes if collusion breaks down.
    JEL: F3 G3
    Date: 2016–02–01
  4. By: Tewathia, Nidhi
    Abstract: In India, workers in the informal sector are considered to be vulnerable and marginalised. Benefits of economic growth rarely reach to this segment of the society and they are also excluded from benefits of physical and social infrastructure expansion. This is particularly true for women. Women are constantly engaged in the household activities which are often unacknowledged and unquantified. This unparallel contribution of women towards social reproduction of class has remained unpaid. Now that more and more women have started to take up employment outside the house, they are not able to perform household activities. The domestic helps have replaced them for performing household work and are being paid for it. The household work which was earlier unpaid has been quantified to some extent as payment is made to the domestic workers for such work. This paper discusses the unaccounted and invisible contribution of women domestic workers in our country. Women domestic workers are not recognized as workers and their work is undervalued. Home of the employer is the workplace for the domestic workers and this unique feature makes them vulnerable to abuses, exploitation and acute working conditions. But, these workers themselves are left on the margins of the development matrix. Stuck between bad working conditions and expectations of subservient loyalty, the Indian domestic worker has to cope with the worst aspects of both feudalism and capitalism. This has led to a slew of new challenges for social justice that needs urgent consideration of the law makers and social scientists, given our national objective of inclusive growth. There is a common reluctance, in India, to accept the home as a work place. This is the prime reason for the low priority attached to labour rights and welfare in the current policy paradigm. The official data is unreliable and grossly inadequate as domestic work is notoriously under enumerated. The paper concludes by emphasising that the regulation and formalization of the domestic employment relationship is in the interests of both workers and employers. The government needs to draw its attention to the urgent need of provision of skill development, written contracts, regulatory body and regular inspections for the domestic workers. With the basic elements of protection, the government can assure them a minimum standard of living, compatible with self-respect and dignity which is essential to social justice.
    Keywords: Women, domestic, workers, India
    JEL: J21 J61
    Date: 2017–10–15
  5. By: Meagher, Kate; Manna, Laura; Bolt, Maxim
    Abstract: This introductory article explores the transformative potential of global connections for African workers. It challenges recent claims that African workers have become functionally irrelevant to the global economy by examining the shift of global demand for African workers from formal to increasingly informalised labour arrangements, mediated by social enterprises, labour brokers and graduate entrepreneurs. Focusing on global employment connections initiated from above and from below, we consider why global labour linkages have tended to increase rather than reduce problems of vulnerable and unstable working conditions within African countries, and consider the economic and political conditions needed for African workers to capture the gains of inclusion in the global economy.
    JEL: N0
    Date: 2016–03–22
  6. By: Subbiah, Adritha; Mansoor, Sahar; Misra, Rachita; Jaffer, Huda; Tiwary, Raunak
    Abstract: Integrated Energy Centres, solar power community hubs for need based services, have been operationalised by SELCO Foundation for informal migrant communities in Karnataka, India since 2011. There are 26 IECs till date, offering 22 different services. Through the interventions, 6074 households have been impacted. The paper describes three different models through case studies illustrating their operational and financial aspects.
    Keywords: energy access; urban slums; solar; livelihoods
    JEL: N0
    Date: 2016–10–07

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