nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2018‒02‒19
seven papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Informality and the Labor Market Effects of Financial Crises By Emilio Colombo; Lorenzo Menna; Patrizio Tirelli
  3. Implications of Trade policies in segmented factor markets – A general equilibrium approach By Soumyatanu Mukherjee; Shreya Banerjee
  4. Inferring Tax Compliance from Pass-through: Evidence from Airbnb Tax Enforcement Agreements By Andrew J. Bibler; Keith F. Teltser; Mark J. Tremblay
  5. Alternative finance and credit sector reforms: the case of China By Noëmi, Lisack
  6. Impacto de los subsidios estatales sobre el mercado laboral en Colombia By Stefano Farne; David Arturo Rodríguez Guerrero; Paola Ríos
  7. Redes sociales y sectores subalternos del contrabando terrestre en la frontera inter-imperial, 1780-1810. By Adriana Dávila; María Inés Moraes

  1. By: Emilio Colombo; Lorenzo Menna; Patrizio Tirelli
    Abstract: We provide evidence, based on a large sample of countries, on the effects of financial crises on key labor market indicators, including official and unofficial employment, unemployment and the participation rate. Crises are followed by a drop in the official market participation rate and by an increase in informal employment. These responses are strongly persistent. Empirical results are then interpreted with a DSGE model which accounts for informality and for financial and labor market frictions. In this framework the informal sector acts as a buffer which absorbs workers in bad times and vice versa. Our simulations suggest the informal sector also is a crisis amplifier for the official economy. In fact, the larger the pre-crisis informal sector, the stronger the labor reallocation, i.e. the fall in the participation rate, necessary to equilibrate the labor market.
    JEL: E26 E32 G01
    Date: 2018
  2. By: Dagmara Nikulin (Gdansk University of Technology, Gdansk, Poland); Maciej Berêsewicz (Poznañ University of Economics and Business, Centre for Small Area Estimation, Statistical Office in Poznañ, Poznan, Poland)
    Abstract: The main goal of our article is to bridge the gap in the regional analysis of informal employment in Poland and in particular to indicate the propensity for informal work in the working age population, to test if informal activities are typical for marginalized people (less educated, unemployed, older) and to identify the regional and spatial heterogeneity in the propensity. We use data from the ‘Human Capital Balance 2010-2014’ survey. Results indicate a strong relationship between the probability of informal work and age, sex and labour force status. Moreover, a strong spatial dependency can be observed.
    Keywords: Informal employment propensity, unregistered work, shadow economy, spatial Bayesian analysis, INLA
    JEL: J21 R12 R23
    Date: 2018–01
  3. By: Soumyatanu Mukherjee; Shreya Banerjee
    Abstract: This paper, using a three sector full-employment general equilibrium model with segmented domestic factor markets, explains how and under what conditions a policy of import restriction using tariffs can be beneficial for a small, open economy compared to the import liberalisation policy, contrary to the conventional results. Also, inflows of foreign-owned capital to an export sector within the economy’s export processing zone coupled with labour-augmenting type technology transfer, with protected import-competing sector, can improve national income, even without any distortion in the formal sector labour market. This simple application of competitive trade models establishes the fact that trade restrictions can promote growth and attract FDI for the developing countries, even when foreign capital enters one specific export sector of the economy.
    Keywords: tariff; foreign capital; segmented factor markets; general equilibrium.
    Date: 2018
  4. By: Andrew J. Bibler; Keith F. Teltser; Mark J. Tremblay
    Abstract: Tax enforcement can be prohibitively costly when market transactions and participants are difficult to observe. Evasion among market participants may reduce tax revenue and provide certain types of suppliers an undue competitive advantage. Whether efforts to fully enforce taxes are worthwhile depends on the rate of compliance in the absence of such efforts. In this paper, we show that an upper bound on pre-enforcement tax compliance can be obtained using market data on pre- and post-enforcement periods. To do this, we estimate the pass-through of tax enforcement agreements between the largest online short-term housing rental platform and state and local governments, which achieve full compliance at the point of sale. Using transaction-level data on Airbnb listings across a number of U.S. metropolitan areas, as well as variation in enforcement agreements across time, location, and tax rate, we estimate that taxes are paid on no more than 23 percent of Airbnb transactions prior to enforcement. We also provide insight on demand- and supply-side responses to taxation in online and sharing economy marketplaces, as well as the potential associated inefficiencies.
    Keywords: tax compliance, evasion, enforcement, short-term housing rentals, sharing economy, Airbnb
    JEL: H20 H22 H26 L10
    Date: 2018–02
  5. By: Noëmi, Lisack (Bank of England)
    Abstract: This paper studies the impact of credit sector reforms in a general equilibrium framework where heterogeneous firms choose their optimal investment and how to finance it. Besides retained earnings and bank loans, I focus on the crucial role played by alternative sources of funding, including family, friends, non-listed equity and informal banking institutions. While small young enterprises face important difficulties to finance their investment, these alternative financing sources allow them to partially bypass credit constraints. The model can account for the financing patterns observed in Chinese data. Despite an increase in non-performing loans by 11%, liberalizing the banking sector increases the steady-state aggregate level of capital by 10% and the steady-state aggregate production by 5%, inducing efficiency gains and a welfare increase of 1.8%. Selectively tightening the regulation of the alternative finance sector, if simultaneous to bank liberalization, may prevent the rise in non-performing loans while preserving most welfare improvements. This remains however detrimental to the development of small, young enterprises and limits efficiency gains.
    Keywords: Informal finance; banking reform; heterogeneous agents; credit constraints; China
    JEL: E22 O16 O17
    Date: 2017–11–17
  6. By: Stefano Farne; David Arturo Rodríguez Guerrero; Paola Ríos
    Abstract: Según las estadísticas del Departamento Administrativo Nacional de Estadística (DANE), entre enero de 2009 y diciembre de 2014, los hogares colombianos que recibieron ayudas en dinero de instituciones pasaron de 700.000 a casi 3.000.000. Así, cualquiera que sea su finalidad y forma de entrega, estas ayudas pueden tener repercusiones sobre la decisión de participación en el mercado laboral por parte de los integrantes del grupo familiar beneficiario y, una vez tomada la decisión de participar, sobre la conveniencia de emplearse en el sector formal de la economía. Entonces, utilizando los microdatos de un panel a hogares, este documento estima un modelo econométrico de diferencias en diferencias con el fin de verificar el impacto de algunos programas sociales del Estado colombiano sobre la participación laboral y la informalidad de los adultos con responsabilidades familiares, residentes en áreas urbanas. Los resultados indican que el recibir ayudas por parte del Estado no tiene mayores efectos sobre la decisión de participar en el mercado laboral. Por el contrario, algunas transferencias, y sobre todo el acceso subsidiado a los servicios de salud, condicionan a los beneficiarios a permanecer en la informalidad.
    Keywords: empleo formal, trabajo informal, informalidad, participación, programas sociales, incentivos, subsidios, beneficios económicos, beps, formal work, formal job, formal employment, informal work, informal job, informal employment, trabalho formal, trabalho não declarado, market share, labour participation, labor participation, market participation, labour force, manpower, participação no mercado, participação laboral, participação no trabalho, participação da mão-de-obra, social programs, social programmes, programas sociais, welfare, economic benefits, subsidies, subvenções, auxilios, grants, allowance, allowances, seguridad social, segurança social, seguridade social, previdência social, cobertura social, social security, mercado de trabajo, labor market, labour market, mercado de trabalho, mercado do trablaho, economía, economy, labour economics, labor economics, economia do trabalho, economía laboral, colombia, latam, la, externado, uexternado, uec, observatorio, boletin, working paper, doc, stefano farne, farne
    JEL: E26 J22 I38 H55
    Date: 2016–08–08
  7. By: Adriana Dávila (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); María Inés Moraes (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: This text is part of a larger effort on the smuggling phenomenon between the two Iberian empires in the Río de la Plata. Its objective is to better understand a type of illegal inter-imperial trade exchanges in the Río de la Plata during the late colonial period. It is about exchanges made by land (or by rivers and inland lagoons) in the last quarter of the 18th century and the beginning of the 19th century, between the territories on the north shore of the Río de la Plata and what was the Captaincy of Rio Grande do Sul. In these circuits, live animals, leather, textiles, tobacco and slaves were traded. Its economic, political and social importance is widely accepted by regional historiography. This paper presents evidence on the actors involved in these illegal exchanges, with emphasis on the subaltern sectors that formed the last link in the chain of agents involved in smuggling. The same was obtained from 180 judicial files generated in repressive interventions on goods and persons of illegal traffic, in different spaces of the northern band of the Río de la Plata between 1780-1810. The paper uses research techniques of network analysis to characterize the agents involved, as well as their economic, financial and social ties.
    Keywords: social network, contraband, border, smuggling
    JEL: N26
    Date: 2017–12

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