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on Informal and Underground Economics |
| By: | Bobba, Matteo (Toulouse School of Economics); Flabbi, Luca (University of North Carolina, Chapel Hill); Levy Algazi, Santiago (Inter-American Development Bank); Tejada, Mauricio (Universidad Alberto Hurtado) |
| Abstract: | We develop a search and matching model where firms and workers produce output that depends both on match-specific productivity and on worker-specific human capital. The human capital is accumulated while working but depreciates while searching for a job. Jobs can be formal or informal and firms post the formality status. The equilibrium is characterized by an endogenous steady state distribution of human capital and by an endogenous formality rate. The model is estimated on longitudinal labor market data for Mexico. Human capital accumulation on-the-job is responsible for more than half of the overall value of production and upgrades more quickly while working formally than informally. Policy experiments reveal that the dynamics of human capital accumulation magnifies the negative impact on productivity of the labor market institutions that give raise to informality. |
| Keywords: | labor market frictions, search and matching, Nash bargaining, informality, on-the-job human capital accumulation |
| JEL: | J24 J3 J64 O17 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12091&r=all |
| By: | Kumar, Krishna B. (RAND); Mahmud, Minhaj (Bangladesh Institute of Development Studies (BIDS)); Nataraj, Shanthi (RAND); Cho, Yoon Y. (World Bank) |
| Abstract: | Informality is ubiquitous in the labor markets of developing countries, and requiring that firms formally register, pay taxes, and provide employee benefits stipulated in labor regulations to reduce such informality is challenging. However, a matched survey on employer-employee preferences suggests that mutually beneficial job benefits exist, and that encouraging their adoption might be feasible. Carefully designed discrete choice experiments on combinations of benefits related to compensation, leave and termination policies, working conditions, and accident insurance, along with incentives for employers, reveal the relative values that workers and employers attach to each benefit. The results show that workers tend to value advance notice for job termination and accident insurance, and that employers are not averse to providing these benefits. In contrast, workers find long working hours without overtime compensation to be highly undesirable, whereas many employers are generally unwilling to provide shorter hours or overtime pay unless they face the threat of fines or are offered substantial incentives for doing so. Our findings therefore suggest that encouraging the provision of termination notice and accident insurance may be relatively easy, but that increasing compliance with legal limits on working hours and overtime compensation is likely to require increased enforcement or substantial incentives. |
| Keywords: | informality, worker benefits, discrete choice experiments |
| JEL: | J32 J81 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12064&r=all |
| By: | Philippe Adair; Ali Souag |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:eru:erudwp:wp19-04&r=all |
| By: | Aksu, Ege (CUNY Graduate Center); Erzan, Refik (Bogazici University); Kirdar, Murat G. (Bogazici University) |
| Abstract: | We estimate the effects of the arrival of 2.5 million Syrian migrants in Turkey by the end of 2015 on the labor market outcomes of natives, using a difference-in-differences IV methodology. We show that relaxing the common-trend assumption of this methodology - unlike recent papers in the same setting - makes a substantial difference in several key outcomes. Despite the massive size of the migrant influx, no adverse effects on the average wages of men or women or on total employment of men are observed. For women, however, total employment falls - which results mainly from the elimination of part-time jobs. While the migrant influx has adverse effects on competing native workers in the informal sector, it has favorable effects on complementary workers in the formal sector. We estimate about one-to-one replacement in employment for native men in the informal sector, whereas both wage employment and wages of men in the formal sector increase. Our findings, including those on the heterogeneity of effects by age and education, are consistent with the implications of the canonical migration model. In addition, increases in prices in the product market and in capital flow to the treatment regions contribute to the rise in labor demand in the formal sector. |
| Keywords: | labor force and employment, wages, immigrant workers, formal and informal sectors, Syrian refugees, Turkey, difference-in-differences, instrumental variables |
| JEL: | J21 J31 J61 C26 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12050&r=all |
| By: | Laila Ait Bihi Ouali (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This paper provides empirical evidence that, after fiscal scandals, individuals substantially revise their views on redistribution. I exploit as a quasi-natural experiment the 2016 Panama Papers scandal which revealed top-income tax evasion behaviour simultaneously worldwide. The empirical investigation relies on two original sources of data: a longitudinal dataset on United Kingdom households and a survey conducted in twenty-two European countries. Using a difference-in-differences strategy, I find an increase in pro-redistribution statements post-scandal ranging between 2% and 3.3%. Responses are heterogeneous on income levels and on political affiliations, with larger responses from right-wing individuals. The change in redistribution preferences is moderately translated into votes: I find an increase in voting intentions for the left and negative for the right-wing parties. Complementary estimations at the European-level indicate that pro-redistribution responses increase with media coverage and shock intensity (i.e., number of individuals involved). |
| Keywords: | Panama Papers,tax evasion,tax avoidance,redistribution,tax morale,inequality,mass media |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01978131&r=all |
| By: | van den Boogaard, Vanessa; Prichard, Wilson; Jibao, Samuel |
| Abstract: | In low-income countries, citizens often pay ‘taxes’ that differ substantially from what is required by statute. These non-statutory taxes are central to financing both local public goods and maintaining informal governance institutions. This study captures the incidence of informal taxation and taxpayer perspectives on these payments. We find, first, that informal taxes are a prevalent reality within areas of weak formal statehood in Sierra Leone, with households paying an equal number of informal and formal taxes. Second, we find positive taxpayer perceptions of the fairness of informal taxes relative to formal taxes, despite informal taxes being regressive in their distribution. We explain this by the fact that taxpayers are more likely to trust the actor levying these payments and are more likely to believe that they will be used to deliver benefits to the community. |
| Keywords: | Finance, Governance, |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:idq:ictduk:14294&r=all |