nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2018‒06‒18
eight papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Tax Evasion on a Social Network By Duccio Gamannossi degl'Innocenti; Matthew D. Rablen
  2. Regulatory Burdens in Tax Administration and Firms’ Compliance Costs in Africa By Ali, Merima
  3. “What drives the spatial wage premium for formal and informal workers? The case of Ecuador” By Alessia Matano; Moisés Obaco; Vicente Royuela
  4. Gender, informal employment and trade liberalization in Mexico By Ben Yahmed, Sarra; Bombarda, Pamela
  5. Social Networks and Informal Financial Inclusion in the People’s Republic of China By Chai, Shijun; Chen, Yang; Huang, Bihong; Ye, Dezhu
  6. The dynamics of finance-growth-inequality nexus: Theory and Evidence for India By Pranab Kumar Das; Bhaswati Ganguli; Sugata Marjit; Sugata Sen Roy
  7. Trabalhadores no setor informal e esquemas contributivos de previdência social ? o caso da Tanzânia By Flora Myamba

  1. By: Duccio Gamannossi degl'Innocenti; Matthew D. Rablen
    Abstract: We relate tax evasion behavior to a substantial literature on self and social comparison in judgements. Tax payers engage in tax evasion as a means to boost their expected consumption relative to others in their “local” social network, and relative to past consumption. The unique Nash equilibrium of the model relates optimal evasion to a (Bonacich) measure of network centrality: more central taxpayers evade more. The indirect revenue effects from auditing are shown to be ordinally equivalent to a related Bonacich centrality. We generate networks corresponding closely to the observed structure of social networks observed empirically. In particular, our networks contain celebrity taxpayers, whose consumption is widely observed, and who are systematically of higher wealth. In this context we show that, if the tax authority can observe the social network, it is able to raise its audit revenue by around six percent.
    Keywords: tax evasion, social networks, network centrality, optimal auditing, social comparison, self comparison, habit, indirect effects, relative consumption
    JEL: H26 D85 K42
    Date: 2018
  2. By: Ali, Merima
    Abstract: This paper examines the effect of regulatory burdens related to tax administration on firms’ compliance costs in Africa. Using cross-country firm-level data, the results show that regulatory burdens related to tax administration significantly increase firms’ compliance costs compared to burdens related to other kinds of government regulations. The results further show that firms’ relationships with tax officials affect their compliance costs. While firms that are frequently inspected by tax officials have higher compliance costs, firms that are requested to pay bribes by tax officials, on the other hand, have lower compliance costs. These results, which remain robust after accounting for other firm-, sector- and country-specific factors, highlight that regulatory burdens related to taxation play a bigger role in increasing overall compliance costs in Africa than other forms of regulatory burdens, and that firms may look to informal ways to reduce the burden by paying bribes to tax officials.
    Keywords: Governance,
    Date: 2018
  3. By: Alessia Matano (AQR-IREA, University of Barcelona (UB). Tel.: +34-934021825; Fax.: +34-934021821. Department of Econometrics, Statistics and Applied Economics, University of Barcelona, Diagonal 690, 08034 Barcelona, Spain.); Moisés Obaco (AQR-IREA, University of Barcelona, Av. Diagonal 690 (08034), Barcelona, Spain.); Vicente Royuela (AQR-IREA, University of Barcelona, Av. Diagonal 690 (08034), Barcelona, Spain.)
    Abstract: This article investigates the incidence of agglomeration externalities in a typical developing country, Ecuador. In particular, we analyze the role of the informal sector within these relations, since informal employment accounts for a significant part of total employment in the developing countries. Using individual level data and instrumental variable techniques, we investigate the impact of spatial externalities, in terms of population size and local specialization, on the wages of workers in Ecuadorian cities. The results show that spatial externalities matter also for a typical developing country, especially as far as urbanization externalities are concerned. Moreover, analysis of the interaction between spatial externalities and the informal economy shows a general penalization for informal workers in terms of benefits arising from agglomeration externalities. Finally, by investigating the possible channels behind the heterogeneity found in spatial agglomeration gains between formal and informal workers, we show that the advantages from agglomeration for formal workers may well be accounted for by positive sorting and better gains from job changes, while for informal workers they arise from positive learning externalities.
    Keywords: Agglomeration Externalities, Developing Economies, Informal Employment, Workers’ Wages, FUAs, Ecuador. JEL classification:J31, J46, R23, R12.
    Date: 2018–06
  4. By: Ben Yahmed, Sarra; Bombarda, Pamela
    Abstract: We study how trade liberalization affects formal employment across gender. We propose a theoretical mechanism to explain how male and female formal employment shares can respond differently to trade liberalization through labor reallocation across tradable and non-tradable sectors. Using Mexican data over the period 1993-2001, we find that tariff cuts increase the probability of working formally for both men and women within 4-digit manufacturing industries. The formalization of jobs within tradable sectors is driven by large firms. Constructing a regional tariff measure, we find that regional exposure to trade liberalization increases the probability of working formally in the manufacturing sector for both men and women, and especially for men. However in the service sectors, the probability of working formally decreases for low-skilled women.
    Keywords: formal and informal labor,gender,trade liberalization,Mexico
    JEL: F11 F16 O17
    Date: 2018
  5. By: Chai, Shijun (Asian Development Bank Institute); Chen, Yang (Asian Development Bank Institute); Huang, Bihong (Asian Development Bank Institute); Ye, Dezhu (Asian Development Bank Institute)
    Abstract: Using the 2011 China Household Finance Survey (CHFS) database, we explore the heterogeneous impacts of social networks on informal financial inclusion for urban and rural households in the People’s Republic of China. We find that social networks significantly increase the probability of households’ participation in the informal financial market, augment the size of informal financial transactions, and raise the ratio of informal lending to total household assets. We also identify the mechanisms through which social networks affect households’ participation in the informal financial market. By reducing the information cost, perceived risk, and precautionary saving, social networks play a larger role for urban households than for rural households. Notably, the effects of social networks on informal finance are strengthened by the development of the formal financial market.
    Keywords: social networks; informal financial inclusion; perceived risk; precautionary saving; formal financial market
    JEL: D10 G20
    Date: 2018–01–29
  6. By: Pranab Kumar Das (Reserve Bank of India Professor of Industrial Economics, Centre for Studies in Social Sciences, Calcutta(CSSSC).); Bhaswati Ganguli (Department of Statistics, University of Calcutta); Sugata Marjit (Centre for Studies in Social Sciences, Calcutta(CSSSC).); Sugata Sen Roy (Department of Statistics, University of Calcutta)
    Abstract: The paper critically inquires the ‘finance-growth-inequality’ nexus based on an econometric analysis of the IHDS Survey data for two rounds – 2005-06 and 2011-12. The study attempts to assess the co-evolution of finance-growth-inequality in an intertemporal framework. At the household level asset is still the most important determinant of bank loans inspite of several policy measures aimed at financial inclusion. However, the probability of receiving a bank loan increases if any member of the household is active participant of the local level government or caste association. The most important finding of the paper pertains to the econometric result that the household asset grows at the same rate independent of the source of loans - banks or informal moneylenders though the level effect (intercept) is higher if the loan is obtained from banks or lower if the household lives below poverty line. The same observation is also confirmed for per capita income of the households. The phenomenon is explained in a theoretical model of intertemporal choice of entrepreneur-investor to show that if there are both formal and informal sources of borrowing with a constraint on the formal sector borrowing and no constraint on the latter, then growth rates of asset and income are determined by the informal sector interest rate. This result can be generalised for any number of sources of borrowing. This questions the conventional wisdom regarding the policy aimed at financial inclusion. Inequality of income increases independent of the source of borrowing, though the households living below poverty line are worse off in general. If the major source of borrowing is bank for the business and industry then inequality increases more for the above poverty line households than if the major source is moneylenders or the households belong to the below poverty line category. Moneylenders as the source of borrowing is not as regressive as is believed. So the whole issue of financial inclusion needs a review in the light of the findings of the paper.
    Keywords: Financial development, Financial Inclusion Growth, Inequality, Bank, India, IHDS, Logit Model
    JEL: C35 E5 G21 O11
    Date: 2018–05–22
  7. By: Flora Myamba (IPC-IG)
    Abstract: "O Relatório da Organização para a Cooperação e Desenvolvimento Econômico (OCDE) intitulado Social Protection in East Africa: Harnessing the Future (OCDE, 2017), recentemente produzido pelo projeto Sistemas de Proteção Social da União Europeia (EU-SPS), destaca as baixas taxas de cobertura da proteção social no setor informal da África Oriental como um dos sete grandes desafios a serem enfrentados nos próximos 50 anos. Muitos países em desenvolvimento na África Subsaariana são pobres e vulneráveis há anos e com altas taxas de informalidade em seus mercados de trabalho: a maioria da população rural que pratica a agricultura e os pobres urbanos trabalham no setor informal. Os mecanismos de proteção social do setor público continuam fracos ou até mesmo inexistentes. Portanto, a obrigação de proteger a população de riscos e choques econômicos e sociais cabe às próprias famílias e às comunidades ? principalmente às mulheres. Essa é a essência da proteção tradicional (e formal) na África Subsaariana: a percepção da qual tem sido usada para justificar os parcos recursos alocados ao setor em políticas e programas governamentais". (...)
    Keywords: Trabalhadores, setor informal, esquemas contributivos, previdência social, caso, Tanzânia
    Date: 2017–09
  8. By: Nimaga Amara; Mamadou Sarr (ESS - Environnement, Santé, Sociétés - CNRS - Centre National de la Recherche Scientifique); Mamadou Silla; Serge Simen; Bassirou Tidjani (ESP Dakar - École Supérieure Polytechnique de Dakar - UCAD - Université Cheikh Anta Diop)
    Abstract: Par le nombre d'entreprises qui le compose, la contribution de ces dernières à la création d'emplois et au PIB, le secteur informel, en Afrique en général et au Sénégal en particulier, constitue la règle et non l'exception. Donc, parler de l'entreprise au Sénégal, dans une très large mesure devrait revenir à parler du secteur informel, bien que l'enseignement et la recherche en Sciences de Gestion dans ce pays nous aient habitués à mettre l'accent sur la grande entreprise, pourtant minoritaire. En partant de l'observation de plusieurs métiers, et en s'appuyant sur une approche qualitative inductive, la présente contribution a pour objectif de démontrer que l'intégration des activités des unités de production ou de prestation de service (UPS) du secteur informel aux processus sociaux, devrait permettre à ces dernières de garantir dans leur gestion un niveau de cohérence élevée entre : gestion des ressources humaines, préoccupations sociales, exigences économiques, et préoccupations environnementales. Nous considérons la recherche d'une telle cohérence comme une condition de pérennité de l'entreprise. En partant également de l'idée selon laquelle « l'entreprise est une affaire de société » (Sainsaulieu, 1992), nous développons l'argument selon lequel les pratiques du secteur informel, compte tenu de leur intégration aux processus sociaux, devraient servir de point de départ dans le débat sur la mise en place d'une GRH durable dans les entreprises au Sénégal. Mots clés : secteur informel – processus sociaux – GRH – regroupements-districts industriels-cohérence. LE SECTEUR INFORMEL: CARACTERISTIQUES ET POTENTIALITES D'UN CHAMP D'ETUDES DANS LE DEBAT SUR LA GRH DURABLE Résumé : Par le nombre d'entreprises qui le compose, la contribution de ces dernières à la création d'emplois et au PIB, le secteur informel, en Afrique en général et au Sénégal en particulier, constitue la règle et non l'exception. Donc, parler de l'entreprise au Sénégal, dans une très large mesure devrait revenir à parler du secteur informel, bien que l'enseignement et la recherche en Sciences de Gestion
    Date: 2018–05–01

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