nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2019‒09‒09
three papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Disentangling tax evasion from inefficiency in firms tax declaration: an integrated approach By Giancarlo Ferrara; Arianna Campagna; Vincenzo Atella
  2. Who Gained from India’s Demonetization? Insights from Satellites and Surveys By Chanda, Areendam; Cook, Justin
  3. Formal Employment and Organized Crime: Regression Discontinuity Evidence from Colombia By Gaurav Khanna; Carlos Medina; Anant Nyshadham; Jorge A. Tamayo

  1. By: Giancarlo Ferrara (SOSE - Soluzioni per il Sistema Economico S.p.A); Arianna Campagna (SOSE - Soluzioni per il Sistema Economico S.p.A); Vincenzo Atella (SOSE, CEIS & DEF University of Rome "Tor Vergata")
    Abstract: In this article we present a new methodology to support fiscal monitoring by the Italian Revenue Agency (IRA) with the aim of improving current taxpayers fiscal compliance and fighting tax evasion within small and medium enterprises. In fact, given the methodology behind the Sector Studies (Studi di Settore - SdS) system, there is room for firms to implement tax evasion strategies by simply adjusting revenues (and costs) toward an estimated average threshold (known ex-ante), the so called "presumptive" revenues, and achieving the fiscal "congruity" status. By estimating a production function through stochastic frontier analysis we avoid estimating the average threshold know ex-ante and can combine information on firm economic efficiency with those on fiscal congruity, thus being able to disentangle underreporting of revenues due to potential firm tax evasion behaviours from underreporting due to firm inefficiencies. We apply this framework to two samples of Italian firms belonging to two Sector Studies. Our results confirm the potentiality of the approach, although more work is needed before moving to a large scale implementation for policy purposes.
    Keywords: Compliance, Tax evasion, Fiscal monitoring, Production, Sector Studies, Efficiency.
    Date: 2019–09–06
  2. By: Chanda, Areendam; Cook, Justin
    Abstract: On November 8, 2016, the Indian government abruptly demonetized 86% of its currency in circulation in an attempt to reduce black money, corruption, and counterfeiting. Yet, 99% of the currency was eventually returned to banks. We exploit large regional variations in deposit growth as a result of demonetization to study the medium-term effects of this policy. Using night-light data, we show that districts which experienced higher deposit growth during the demonetization period recorded higher levels of economic activity in the year and a half that followed. We estimate a one standard deviation increase in deposits is associated with a 5% increase in district GDP per capita. Further, districts with larger rural population, agricultural and non-agricultural informal labor shares also recorded an increase in nighttime light activity. The results are also supported by household-level surveys on income and expenditures.
    Keywords: Demonetization, Regional Economic Growth, Monetary Policy, Indian Economy, Difference in Difference, Informal Economy, Agriculture, Credit
    JEL: E21 E26 E51 E65 O11 O13 O16 O17 O18 O5
    Date: 2019–08–23
  3. By: Gaurav Khanna; Carlos Medina; Anant Nyshadham; Jorge A. Tamayo
    Abstract: Canonical models of crime emphasize economic incentives. Yet, causal evidence of sorting into criminal occupations in response to individual-level variation in incentives is limited. We link administrative socioeconomic microdata with the universe of arrests in Medellín over a decade. We exploit exogenous variation in formal-sector employment around a socioeconomic-score cutoff, below which individuals receive benefits if not formally employed, to test whether a higher cost to formal-sector employment induces crime. Regression discontinuity estimates show this policy generated reductions in formal-sector employment and a corresponding spike in organized crime, but no effects on crimes of impulse or opportunity.
    JEL: J24 K42
    Date: 2019–08

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