nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2019‒01‒21
five papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Emerging trends in the use of technology as a driver of the transition to formality Experiences from Asia and the Pacific By Bhattarai, Tejeshwi Nath.
  2. The Informalization of the Egyptian Economy (1998-2012): A Factor in Growing Wage Inequality? By Amirah El-Haddad; May Gadallah
  3. Inclusive services for youth in Cairo’s informal areas By Deena Khalil; Amr Abdelaal; Yasmin Khalafallah; Marwa Barakat
  4. Industrial Relations and Social Dialogue in the Age of Collaborative Economy (IRSDACE), National Report Hungary By Tibor T Meszmann
  5. Republic of Poland; Technical Assistance Report-Revenue Administration Gap Analysis Program—The Value-Added Tax Gap By International Monetary Fund

  1. By: Bhattarai, Tejeshwi Nath.
    Abstract: Informality trends across labour markets are likely to be affected by the rising diffusion of technology in many ways. On the one hand, there are apprehensions concerning the risks of job losses due to increasing automation of production processes and also fears of increasing technology driven incidences of informal jobs in the formal sector as crowdwork continues to spread. On the other hand, governments are keen to reap development dividends, courtesy of technological advancements. The subject matter of this paper concerns the latter. One way in which technology can aid the transition to formality is by amplifying the impact of policies aimed at driving such transitions. New technologies are therefore being increasingly integrated into public policies, plans, and programmes that are either directly aimed at or indirectly contribute towards driving the transition to formality. This working paper examines such “e-formality” approaches in the Asia Pacific region. It provides an inventory of current of public initiatives, programmes, and policies that have incorporated the use of technology and have either directly or indirectly become vehicles for increased formalization or the transition towards it.
    Date: 2018
  2. By: Amirah El-Haddad (German Development Institute); May Gadallah
    Abstract: Variations in hourly wage rates explain most of gross earnings inequality among all workers in most countries (OECD 2011). Through running re-centered influence function regressions, we use Firpo et. al’s (2007) distributional approach to identify each control variable’s contribution -on the distributional statistic of choice -to the traditional decomposition of wage changes into structure and composition effects. We address this question for waged men using the Egyptian Labor Market Surveys for 1998, 2006 and 2012. Wage changes between 1998 and 2012 mainly resulted in increased inequality. The richer percentiles have persistently enjoyed disproportionately larger positive changes in real hourly wages, especially between 2006 and 2012. Whilst increasing in all three wage gaps, inequality increased the most between the top and bottom deciles (the 90-10 gap). Informality of the private sector is the largest contributor to increased inequality. The sector does not adhere to a minimum wage. Being unregulated it has responded dramatically to the competitive pressures caused by the departing middle classes of the public sector by suppressing mid and low-end wages resulting in the sharp wage gaps at the tails. Formality has a nuanced effect depending on sector. Wage setting dynamics of the public sector and the direction of labour movements since liberalization cause the sector to contribute much more to wage inequality than does its formal private counterpart. Thus, in a setting where the majority of the labour-force is outside the formal sector, the minimum wage becomes an instrument that increases inequality not one that reduces it. Annual pay freezes are one option. Implementing self-targeted public works programs similar to those of the National Rural Employment Guarantee Act (NREGA) in India serve to increase the “effective informal minimum wage”, thus curbing wage inequality. This in turn will potentially enable wage progression thereby breaking the informality trap of low skill-low wage inertia.
    Date: 2018–06–12
  3. By: Deena Khalil (Takween Integrated Community Development); Amr Abdelaal; Yasmin Khalafallah; Marwa Barakat
    Abstract: This paper studies access to basic services and infrastructure among youth populations in Cairo’s informal areas. Inequality in access to services has been garnering increasing attention particularly in the wake of the 2011 “Arab Spring” uprising. Calls for justice and equality were at the heart of the protests and urban youth were the main protagonists. In Egypt, where the majority of the population is below the age of 30, youth also make up the bulk of the demand for services. Yet in the face of the increasing need for services, coupled with institutional fragmentation, the Egyptian government has continually struggled to keep up with demand, and inequality in access has remained persistent. This paper focuses on how location of residence, specifically, how residing in an informal area, impacts youth’s access to basic services and infrastructure. Focusing on educational, health and recreational facilities, as well as water and sanitation, electricity and solid waste management services, the study draws on research that has shown that informal areas are inadequately served in terms of the availability of basic services as well as connection to public infrastructure networks. In light of this, the paper aims to answer the following questions: What/who are the different entities providing basic services to informal areas in the Greater Cairo Region? What are the gaps in the service provision system, and the different barriers towards youth accessing these services? How do gaps in access to services and infrastructure contribute to youths’ long-term vulnerabilities and jeopardize their transition to adulthood?
    Date: 2018–06–07
  4. By: Tibor T Meszmann
    Abstract: In Hungary, work in the platform economy as such is neither defined nor regulated as a separate area. Industrial relations and working conditions in selected platform sectors typically appear as deviating or innovative segments of the traditional sectors or subsectors of local personal transport, housework, and accommodation services. Regulation is the most important issue at the centre of both discourses and is the main area of interest of platform economy participants. This is also due to traditional employers and their organizations’ insistence on fair competition. Nevertheless, the extent of regulation varies significantly across the platform economy sectors. The platform economy in Hungary was established especially in sectors where more informal services was characteristic. In these labour cost sensitive sectors a high level of informality in industrial i.e. employment relations has been characteristic. Typically, if registered, those working via platforms are either self-employed small entrepreneurs or registered natural persons working as service providers. Such employment forms also do not provide solid ground for self-organization of labour. For platform workers or service providers, the main advantage of platform work was efficiency through the possibility of earning maximal gross incomes or through earning extra income. The main disadvantages seemed to have pointed in the direction of the individualization of risks. There was a lack of preparation for novices in the sector, especially young individuals, who were insufficiently informed about requirements, risks, and lacked administrative information. Although trade unions are aware of some emerging issues, they have much different priorities and limited capacities to organize individual workers. Platforms typically present themselves not as employers but as innovative, alternative enterprises, and they are mostly invisible in public. Social dialogue in the traditional sectors is weak. Consequently, it is weaker in the selected sectors of the platform economy. Labour is extremely atomized and the possibility of interest articulation via trade unions or alternative organizations is typically not recognized.
    Date: 2018–12–09
  5. By: International Monetary Fund
    Abstract: This report presents the results of applying the Revenue Administration Gap Analysis Program (RA-GAP) value-added tax (VAT) gap estimation methodology1 to Poland for the period 2010–16. The RA-GAP methodology employs a top-down approach for estimating the potential VAT base, using statistical data from national accounts on value-added generated in each sector. There are two main components to this methodology for estimating the VAT gap: 1) estimate the potential VAT collections for a given period; and 2) determine the accrued VAT collections for that period. The difference between the two values is the VAT gap. RA-GAP provides estimates of the two components of the tax gap: the compliance gap and the policy gap. The compliance gap is the difference between the potential VAT that could have been collected given the current policy framework and actual accrued VAT collections. The policy gap is the difference between the overall tax gap and the compliance gap. To put the level and trends of the compliance gap into context it is also necessary to analyze the level and trends of the overall tax gap and the policy gap.
    Date: 2018–12–07

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