nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2018‒07‒23
four papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Test of indices FGT of incidence, depth and severity of the informality in DRC By Akhenaton Izu
  2. Informality, Governance and Growth By Dibyendu Maiti; Chandril Bhattacharyya
  3. Incentives and Constraints of Informal Trade Between Nigeria and its Neighbours By Leena Koni Hoffmann; Paul Melly
  4. Less cheating? The effects of prefilled forms on compliance behavior By Fochmann, Martin; Müller, Nadja; Overesch, Michael

  1. By: Akhenaton Izu (Université de Kinshasa - Université de Kinshasa)
    Abstract: On the basis of the objective to seize, in quantified terms, the depth and the loss of tax resources that causes the informal sector, this paper starts from an empirical definition of the informal sector based on the criterion of recording to the register of trade. From there, we had developed the approach of informality per imposition from which the indices of incidence, depth and severity of the informality were developed starting from indices FGT of poverty. The results of indices here high developed provide that 68.31% of the urban informal enterprises do not pay a tax, that is to say 2300000 urban informal enterprises, and the loss of earnings enormous is estimated at 12% of lost revenues from taxes each year following the weight of the urban informal sector.
    Abstract: Ayant pour objectif de saisir, en termes chiffrés, la profondeur et la perte de ressources fiscales qu’occasionne le secteur informel, ce papier part d’une définition empirique du secteur informel basée sur le critère d’enregistrement au registre de commerce. De là, nous avions développé l’approche de l’informalité par imposition à partir de laquelle les indices d’incidence, de profondeur et de sévérité de l’informalité ont été développés à l’instar des indices FGT de la pauvreté. Les résultats des indices ci-haut développés pourvoient que 68.31% des UPI urbaines ne paient pas d’impôt, soit 2.300.000 UPI urbaines, et le manque à gagner est énorme estimé à 12% de recettes fiscales perdues chaque année suite au poids du secteur informel urbain.
    Keywords: Keywords:Informal sector, Poverty, Tax, Pauvreté,Secteur informel, Impot
    Date: 2016–10–26
  2. By: Dibyendu Maiti (Department of Economics, Delhi School of Economics); Chandril Bhattacharyya (Centre for Development Studies, Kerala)
    Abstract: This paper develops a growth framework of a typical developing and demarcating setting with formal and informal sectors, which faces trade-off of redistribution through either direct subsidy or strategic regulatory concession to operate informal activities. Inverted U-shaped growth and welfare functions against governance are found, which suggests a deliberated weak governance can raise growth and welfare of the economy with large informal sector keeping taxation at lower level. The governance that maximises growth varies inversely with subsidy given to informal sector and formal labour bargaining power. Unlike the level maximising welfare, the governance that maximises growth becomes independent of the bargaining power in case of no subsidy. Using standard parameters, the calibrated growth and welfare functions support these relations. Econometric results derived from instrumental and system regression models using pooled data for 46 countries during 1995-2009 justify such conjectures. This explains why the growing countries show higher level of informality.
    Keywords: informal sector, growth, strategic governance, taxation
    JEL: O43
    Date: 2018–03
  3. By: Leena Koni Hoffmann (Chatham House); Paul Melly (Chatham House)
    Abstract: The scale of unrecorded trade across the border between Nigeria, the region’s biggest economy and market, and its francophone neighbours is particularly high. Despite providing economic incentives, informal trade entails costs, complications and sometimes risks. This paper explores how policy choices and government actions continue to drive informality and the critical steps that might be taken to create a business environment that is more conducive and supportive of trade between West African neighbours on a formal basis. It goes on to examine the steps that have been taken since 2015 regarding trade promotion by West African states and considers the options for further policy action and public investment.
    Keywords: border co-operation, informal trade, regional integration, regional markets, trade network
    JEL: F1 F4 O1 Q1
    Date: 2018–07–18
  4. By: Fochmann, Martin; Müller, Nadja; Overesch, Michael
    Abstract: As a consequence of the digital transformation, individuals are often confronted with prefilled forms or prefilled data entry masks. In situations where cheating and lying are of concern, prefilling and defaults might reduce dishonest behavior. In a controlled experiment, we investigate how correctly and incorrectly prefilled forms influence compliance behavior. We frame our experiment as filing the annual income tax return. We show that correct prefilling enhances compliance. However, in cases of incorrect prefilling, we observe asymmetric effects. If prefilled income is lower than true income, we find no positive compliance effect, and compliance is on the same level as with blank forms. If prefilled income is higher than true income, prefilling still has a positive effect on compliance. In that case, compliance is on the same level as with correctly prefilled forms and higher than with blank forms. Our study contributes to the literature on cheating and lying by showing that prefilled forms and defaults affect compliance by changing the moral costs of dishonest behavior.
    Keywords: Dishonesty,Defaults,Prefilled Forms,Tax Compliance,Behavioral Economics
    JEL: C91 D14 H26
    Date: 2018

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