nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2018‒08‒27
eight papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Effects of institutional history and leniency on collusive corruption and tax evasion By Johannes Buckenmaier; Eugen Dimant; Luigi Mittone
  2. Video Recordings in Experiments – Are There Effects on Self-Selection or the Outcome of the Experiment? By Tim Lohse; Salmai Qari
  3. Formal Informal Interactions: A Simple Chayanov Model By Sengupta, Atanu; De, Sanjoy
  4. Truth and consequences: Bogus pipeline experiment in informal small business lending By Römer, Ulf; Mußhoff, Oliver; Weber, Ron; Turvey, Calum G.
  5. Taxing Africa: Coercion, Reform and Development By Moore, Mick; Prichard, Wilson; Fjeldstad, Odd-Helge
  6. Slum Upgrading and Long-run Urban Development: Evidence from Indonesia By Mariaflavia Harari; Maisy Wong
  7. Análisis Espacial de la Informalidad Laboral a Nivel Intra-urbano By Gustavo A. García; Edgar Julián Muñoz González; Stefany Gallego Ortiz
  8. Pratiques managériales frauduleuses en Algérie : diversité, ampleur et perceptions des acteurs By Cheriet, Foued

  1. By: Johannes Buckenmaier; Eugen Dimant; Luigi Mittone
    Abstract: We investigate the effects of an institutional mechanism that incentivizes taxpayers to blow the whistle on collusive corruption and tax compliance. We explore this through a formal leniency program. In our experiment, we nest collusive corruption within a tax evasion framework. We not only study the effect of the presence of such a mechanism on behavior, but also the dynamic effect caused by the introduction and the removal of leniency. We find that in the presence of a leniency mechanism, subjects collude and accept bribes less often while paying more taxes, but there is no increase in bribe offers. Our results show that the introduction of the opportunity to blow the whistle decreases the collusion and bribe acceptance rate, and increases the collected tax yield. It also does not encourage bribe offers. In contrast, the removal of the institutional mechanism does not induce negative effects, suggesting a positive spillover effect of leniency that persists even after the mechanism has been removed.
    Keywords: Collusive bribery, institutions, tax compliance, leniency, spillover
    JEL: C92 D02 D73 H26 K42
    Date: 2018–08
  2. By: Tim Lohse; Salmai Qari
    Abstract: The use of video recordings in experimental economics has become increasingly popular. However, little attention is paid to how this might affect the composition of the participating subjects and the intended treatment effect. We make a first attempt to shed light on these issues and address them in an incentivized face-to-face tax compliance experiment. The experiment contains two dimensions; i) the level of the fine for non-compliance; and ii) the presence of a recording video camera. The 2x2 design frees the intended treatment effect of the fine from any effect resulting from the announced use of a camera. Our findings point in the direction that neither gender nor personality traits nor other individual characteristics seem to have the explanatory power to predict participation in sessions’ with or without a camera, respectively. Most importantly, the presence of a recording video camera does not affect subjects’ observed decision behavior in the actual experiment.
    Keywords: Laboratory experiments, subject pools, convenience samples, video recordings, face-to-face interaction, tax compliance, cheating
    JEL: C90 C91 H26
    Date: 2018
  3. By: Sengupta, Atanu; De, Sanjoy
    Abstract: Needless to say, the topic of formal-informal interaction is well traversed. Several dual economy models have been in operation to understand the dynamics of formalization-or in its popular acronym-development. Development discourse is essentially a way in which the economy becomes increasingly formalised or its operations become visible to the panoptic vision of law and legal institutions. The story is essentially the same. Formalisation raises efficiency and productivity thereby yielding benefit to all concerned. Also it adds to the society’s overall capacity to reproduce and produce itself giving way to future growth and prosperity. The story told and retold many a times fails to capture the reason for continuous existence or even (re)creation of informality even in a world where formality is the sure way to succeed. In an interesting paper Porta and Shleifer (2014) deals with this issue and comes out with an interesting conclusion. The informal sector does not merely exist for taking advantage of legal loopholes. Even if these loopholes are somehow stitched, the informal sector will not become formal. The clue perhaps lies in an old view expressed by Chayanov (though not included in the standard Chayanovian models) that in certain circumstances an informal sector can outperform a modern capitalist sector. This paper is a modest attempt to include this clue in a formal model of the simplest possible type that tries to unravel the relation between formal and informal sector as also the consequences of policies that leads to forced formalisation.
    Keywords: Informal production, formal production, dual economy model, forced formalisation
    JEL: O10 O12 O14 O17
    Date: 2018–07–28
  4. By: Römer, Ulf; Mußhoff, Oliver; Weber, Ron; Turvey, Calum G.
    Abstract: The prevention of asymmetric information plays a major role in successful small business lending. The purpose of this research is to determine if small business applicants report their income information correctly when requesting a loan. Therefore, a randomized controlled trial bogus pipeline experiment was set up during a typical cash-flow analysis of a bank for small businesses in the Philippines. Results indicate that loan applicants of the treatment group reported a lower income, an effect which is most pronounced in the lowest income percentile. Moreover, our analyses reveal higher loan delinquencies in the control group.
    Keywords: Agribusiness, Agricultural Finance, Financial Economics
    Date: 2017
  5. By: Moore, Mick; Prichard, Wilson; Fjeldstad, Odd-Helge
    Abstract: Taxation has been seen as the domain of charisma-free accountants, lawyers and number crunchers – an unlikely place to encounter big societal questions about democracy, equity or good governance. Yet it is exactly these issues that pervade conversations about taxation among policymakers, tax collectors, civil society activists, journalists and foreign aid donors in Africa today. Tax has become viewed as central to African development. Written by leading international experts, Taxing Africa offers a cutting-edge analysis on all aspects of the continent’s tax regime, displaying the crucial role such arrangements have on attempts to create social justice and push economic advancement. From tax evasion by multinational corporations and African elites to how ordinary people navigate complex webs of ‘informal’ local taxation, the book examines the potential for reform, and how space might be created for enabling locally-led strategies.
    Keywords: Governance,
    Date: 2018
  6. By: Mariaflavia Harari (The Wharton School, University of Pennsy); Maisy Wong (University of Pennsylvania)
    Abstract: The United Nations estimates that a quarter of the world’s urban population lives in slums. This paper sheds light on how a developing country city grows out of informality, through the lens of one of the largest slum upgrading programs in the world. The 1969-1984 Kampung Improvement Program (KIP) provided basic public goods in slums, covering 5 million people and 25% of the city of Jakarta, Indonesia. We assemble a granular database with program boundaries, historical maps, current land values, building heights, measures of land fragmentation, and a novel quality index of informal settlements based on Google Street View and field photos. Our research design compares KIP areas with historical slums that were never treated. Our findings are similar using a boundary discontinuity design. KIP areas today have 12% lower land values and buildings with 1.6 fewer floors on average, implying aggregate impacts of US$11 billion. Greater land fragmentation in KIP areas points towards the importance of land assembly costs as a barrier to formalization. These long-term costs need to be weighed against the benefits of the program. Overall, our findings suggest slum upgrading may be more cost effective for cities in early stages of urban development.
    Date: 2018
  7. By: Gustavo A. García; Edgar Julián Muñoz González; Stefany Gallego Ortiz
    Abstract: En este documento se estudia la dimensión espacial de la informalidad laboral a nivel intra-urbano. Utilizando como caso de estudio la ciudad de Medellín (Colombia), se hace un análisis de la dimensión espacial de la informalidad laboral y a partir de modelos de regresión con dependencia espacial se estudian los principales factores que determinan éste fenómeno. Los resultados muestran que existen marcados patrones espaciales de la informalidad laboral a nivel intra-urbano en Medellín, en donde la ciudad se encuentra segmentada socio-espacialmente entre norte y sur en términos de la calidad del empleo, educación, oportunidades de empleo y condiciones de la vivienda. También se encuentra que un mayor porcentaje de mujeres y mayor porcentaje de viviendas precarias generan incrementos en los niveles de informalidad laboral. Por su parte, las variables asociadas a educación y empleo moderno tienen un efecto negativo sobre éste fenómeno.
    Keywords: Informalidad a nivel intra-urbano; análisis espacial; econometría espacial; Colombia
    JEL: J01 C21
    Date: 2018–08–06
  8. By: Cheriet, Foued
    Abstract: This paper aims to analyze the diversity and breadth of managerial fraud practices through the involved agents perceptions’. For this, we exploited the results of two surveys of 28 private enterprises and public officials in nine different regions in Algeria. Our results showed widespread practices of corruption and commercial or tax fraud, with an institutionalization of practices, and the existence of rational process of innovation in the fraud. These fraud practices appear to be an efficient response of businesses to adapt organization to a complex administrative context, in an unstable economic environment and an abundance of public financial funds.
    Keywords: Agricultural Finance, Industrial Organization, Public Economics
    Date: 2017–10–11

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