nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2018‒10‒15
five papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Shaming for tax enforcement: Evidence from a new policy By Dwenger, Nadja; Treber, Lukas
  2. The rich underreport their income: Assessing bias in inequality estimates and correction methods using linked survey and tax data By Sean Higgins; Nora Lustig; Andrea Vigorito
  3. Microeconomics Foundations of Entrepreneurial Performance in the Informal Sector: A Case Study of Cameroon By Kede Ndouna, Faustine; Tsafack Nanfosso, Roger
  4. Exits from the Poverty Trap and Growth Accelerations in a Dual Economy Model By Jean-Claude BERTHELEMY
  5. The dynamics of finance-growth-inequality nexus: Theory and evidence for India By Pranab Kumar Das; Bhaswati Ganguli; Sugata Marjit; Sugata Sen Roy

  1. By: Dwenger, Nadja; Treber, Lukas
    Abstract: Can public shaming increase tax compliance through social pressure? Many tax authorities make ample use of public shaming. However, empirical evidence from outside the laboratory on how a new shaming law affects overall compliance is lacking. We provide the first evidence from the field, exploiting comprehensive administrative tax data and the introduction of a novel naming-and-shaming policy in Slovenia in 2012. The policy aims to reduce outstanding tax debt among the self-employed and corporations. Our empirical strategy exploits the variation across taxpayers in ex ante exposure to the shaming policy. We find that taxpayers reduce their tax debt by 8.5% to avoid shaming, particularly in industries where reputational concerns are likely to be important. The publication of the first naming-and-shaming list further reduces tax debt among shamed taxpayers because of social learning. This effect, however, is marginal in terms of revenue and tapers off quickly.
    Keywords: compliance,tax debt,shaming,enforcement,social image concerns,penalty
    JEL: H26 D1 K34 K42 Z13
    Date: 2018
  2. By: Sean Higgins (UC Berkeley, USA); Nora Lustig (Tulane University, USA); Andrea Vigorito (Instituto de Economía, FCEA, Universidad de la República, Uruguay)
    Abstract: Do survey respondents misreport their income? If so, how does misreporting correlate with income, how does this affect estimates of income inequality, and how well do existing methods correct for bias? We use a novel database in which a subsample of Uruguay’s official household survey has been linked to tax records to document the extent and distribution of labor income underreporting and to assess the performance of various existing methods to correct inequality estimates. Individuals in the upper half of the income distribution tend to report less labor income in household surveys than those same individuals earn according to tax returns, and underreporting is increasing in income. Using simulations, we find that this leads to downward-biased inequality estimates. Correction methods that rely only on survey data barely affect the biased inequality estimates, while methods that combine survey and tax data can lead to over-correction and overestimation of inequality.
    Keywords: inequality, income underreporting, tax records, household surveys.
    JEL: D31 C81
    Date: 2018–09
  3. By: Kede Ndouna, Faustine; Tsafack Nanfosso, Roger
    Abstract: This study aim is to identify, according to microeconomic approach, the determinants of the performance of individual entrepreneurs in the informal sector in Cameroon, through their units performance. Using the Second Survey in the Informal sector and Employment (SSIE) collected in 2010 in Cameroon, we made two regressions of a profit function of an entrepreneur with the method of multiple regressions after a statistic analysis of some characteristics that influence entrepreneur performance in the informal activities. After this analysis, some lessons emerge. First, there are significant gaps in the income generated by informal activities. Then, the impact of factors that can improve the performance of entrepreneurs varies widely depending on the measurement used to capture their performance (sales or income). Finally, individual factors such as education level, seniority, specific experience in entrepreneurship and the time spent on the job significantly increase the performance of informal entrepreneurs. Similarly, the factors of the firm (sector of activity, level of capital, number of permanent employees) exception due to the age of the firm, also significantly improve the performance of informal entrepreneurs better than the individual factors (27% against 15%). However, the main factor that reduce their performance are the economic environment (difficulties in accessing to infrastructure and finance). This could be explained by the fact that, operating in the informal sector, reduce access to financial services and public infrastructures. Several recommendations can be made in line with the improvement of informal entrepreneurship and access to financial services, in order to build strong entrepreneurship in developing countries.
    Keywords: Informal Entrepreneur, individual characteristics, firm characteristics, environmental characteristics, entrepreneurial performance.
    JEL: C30 L26 O17
    Date: 2017–04–23
  4. By: Jean-Claude BERTHELEMY (Université Paris I Panthéon-Sorbonne)
    Abstract: We propose a simple theoretical dual economy model to study the dynamics of an economy in which individuals move out of a poverty trap. These dynamics are characterized by growth acceleration. This model implies that poverty reduction could, under some circumstances, cause growth, rather than the other way around. We define a measurement of the growth impulse that could be triggered by independent exits from poverty and correlate it with observed growth accelerations. This correlation is both positive and significant, and it passes various robustness checks.
    Keywords: growth acceleration, poverty trap, poverty reduction
    JEL: O11 I32 D31
    Date: 2018–09
  5. By: Pranab Kumar Das; Bhaswati Ganguli; Sugata Marjit; Sugata Sen Roy
    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
    Date: 2018

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