nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2017‒12‒11
six papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Structural change, expanding informality and labour productivity growth in Russia By Voskoboynikov, Ilya B.
  2. Informality and productivity: do firms escape EPL through shadow employment? Evidence from a regression discontinuity design By Giuseppina Gianfreda; Giovanna Vallanti
  3. The impact of unpaid work on employment status in Mexico By Dorn, Franziska; Silbersdorff, Alexander
  4. The co-evolution of tax evasion, social capital and policy responses: A theoretical approach By Luigi Bonatti; Lorenza Lorenzetti
  5. The Double Dividend of Relative Auditing – Theory and Experiments on Corporate Tax Enforcement By Ralph-C. Bayer
  6. Les politiques sectorielles intégrées de formalisation de l'emploi l'exemple du secteur commercial au Burkina Faso By Barussaud, Simon.

  1. By: Voskoboynikov, Ilya B.
    Abstract: Intensive growth, structural change and expanding informality has characterized many developing and emerging economies in recent decades. Yet most empirical investigations into the relationship between structural change and productivity growth overlook informality. This paper includes the informal sector in an analysis of the effects of structural changes in the Russian economy on aggre-gate labour productivity growth. Using a newly developed dataset for 34 industries covering the period 1995–2012 and applying three alternative approaches, aggregate labour productivity growth is decomposed into intra-industry and inter-industry contributions. All three approaches show that the overall contribution of structural change is growth-enhancing, significant and attenuating over time. Labour reallocation from the formal sector to the informal sector tends to reduce growth through the extension of informal activities with low productivity levels. Sectoral labour reallocation effects are found to be highly sensitive to the methods applied.
    JEL: O11 O17 C82 N14
    Date: 2017–11–29
  2. By: Giuseppina Gianfreda (Università della Tuscia); Giovanna Vallanti (LUISS "Guido Carli")
    Abstract: Compliance with labour law has costs and benefits which may depend on the institutional environment in which firms operate. Although several studies have documented a negative effect of informality on firms productivity and growth it is a fact that firms may resort to undeclared employment to escape excessive tax or regulatory burden. We argue that firms may respond to strict employment protection legislation through accrued informality thus (partially) offsetting the negative effect of informality on productivity. We exploit the Italian dismissal legislation imposing higher firing costs for firms with more than 15 workers and show that informality reduces the turnover of formal jobs for firms above the 15 workers threshold; furthermore, while the overall effect of informality on firms productivity is negative, the differential effect for firms above the threshold as compared to smaller firms is positive and significant.
    JEL: D02 D22 D24
    Date: 2017–12
  3. By: Dorn, Franziska; Silbersdorff, Alexander
    Abstract: Women in Mexico spent at least three times as much time on unpaid work compared to men. It is argued that these duties restrict women in their time use and channel them into flexible working arrangements, which are predominantly in the informal economy. This motivates the hypotheses investigated in this paper, that unpaid work impacts employment status of women in Mexico. The empirical investigations are made using the national occupation and employment survey of Mexico. The results obtained from the sequential logit model suggest that hours spend on unpaid work decrease the probability of being formally employed for women.
    Date: 2017
  4. By: Luigi Bonatti; Lorenza Lorenzetti
    Abstract: The dynamic model presented in this paper intends to account for the evidence, which appears to be particularly significant for Italy, showing that the incidence of tax evasion in a certain region is negatively correlated to the level of social capital existing in the region. Beside including social capital among the determinants of tax evasion, we extend the model so as to incorporate a mechanism whereby a high level of tax evasion depresses the formation of social capital, thus helping to explain how regional differences in the endowment of social capital and in the incidence of tax evasion co-evolve and why they tend to be highly persistent. The model seeks also to capture the fact that in a democracy the political determination necessary to effectively repress tax evasion depends on the voters’ propensity toward the phenomenon. Indeed, one should expect that‒in areas where a relatively large (small) number of citizens are tax cheaters—the political consensus in favor of tough policies against tax evasion tends to be weak (strong) and short (long) lasting. Consistently with this intuition, the model shows that regions where social capital is relatively low and tax evasion is relatively high can do better in the long run (i.e., they can reach a steady state characterized by a higher level of social capital and a lower level of tax evasion) when tax-enforcement policies are determined at the national level rather than at the regional level. The opposite is true for regions where social capital is relatively high and tax evasion is relatively low.
    Keywords: Tax compliance, dynamic models, multiple equilibria, tax-enforcement policies
    JEL: C63 D53 G18
    Date: 2016
  5. By: Ralph-C. Bayer (School of Economics, University of Adelaide)
    Abstract: Recent papers have shown that theoretically tax authorities can not only reduce tax evasion but also boost output in oligopolies by conditioning the audit effort spent on a firm on all firms' tax returns in an industry. In this paper we revisit these results and extend the class of relative audit rules with this property by including discontinuous rules. Field experiments testing the theory predictions would require randomizing audit rules across many otherwise identical industries and are therefore impractical. Instead we conduct laboratory tests of the theoretical mechanisms of a variety of rules. We find that both dividends of relative auditing, i.e. less evasion and higher output, materialize in the laboratory. The behavioral mechanism generating the higher output differs somewhat from the one propagated by theory though.
    Keywords: corporate-tax evasion, relative audit rules, experimental tests
    JEL: H26 D43 K4
    Date: 2017–11
  6. By: Barussaud, Simon.
    Abstract: L’objectif principal de cette étude est de faire un diagnostic du secteur commercial informel de la ville de Ouagadougou et d’identifier, du point de vue des acteurs, les principaux facteurs favorisant l’informalisation du tissu entrepreneurial local. Cette étude-diagnostic révèle de manière globale, la forte précarisation/informalisation du secteur commercial de la ville de Ouagadougou qui s’observe depuis plusieurs années (période 2011-2016). La prise en compte de l’hétérogénéité du commerce informel et des caractéristiques diverses des unités qui le compose est une condition sine qua non pour améliorer l’attractivité sur le terrain des critères de formalité et mettre en place un ensemble d’incitatifs efficaces et durables à la formalisation des acteurs.
    Keywords: employment policy, commercial policy, sales, Burkina Faso, survey
    Date: 2017

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.