nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2019‒10‒21
five papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Behavioral Responses to Wealth Taxes: Evidence from Switzerland By Brülhart, Marius; Gruber, Jonathan; Krapf, Matthias; Schmidheiny, Kurt
  2. Missing Miles: Evasion Responses to Car Taxes By Harju, Jarkko; Kosonen, Tuomas; Slemrod, Joel
  3. Tax Compliance in the Rental Housing Market: Evidence from a Field Experiment By Eerola, Essi; Kosonen, Tuomas; Kotakorpi, Kaisa; Lyytikäinen, Teemu; Tuimala, Jarno
  4. Informal employment in Kazakhstan: a blessing in disguise? By Mussurov, Altay; Sholk, Dena; Arabsheibani, G. Reza
  5. Unleashing waste-pickers potential: supporting recycling cooperatives in Santiago de Chile By Navarrete-Hernández, Pablo; Navarrete-Hernandez, Nicolas

  1. By: Brülhart, Marius; Gruber, Jonathan; Krapf, Matthias; Schmidheiny, Kurt
    Abstract: We study how reported wealth responds to changes in wealth tax rates. Exploiting rich intra-national variation in Switzerland, the country with the highest revenue share of annual wealth taxation in the OECD, we find that a 1 percentage point drop in the wealth tax rate raises reported wealth by at least 43% after 6 years. Administrative tax records of two cantons with quasi-randomly assigned differential tax reforms suggest that 24% of the effect arise from taxpayer mobility and 20% from house price capitalization. Savings responses appear unable to explain more than a small fraction of the remainder, suggesting sizable evasion responses in this setting with no third-party reporting of financial wealth.
    Keywords: Behavioral Responses; Switzerland; tax evasion; taxpayer mobility; Wealth Taxation
    JEL: H24 H31 H73
    Date: 2019–10
  2. By: Harju, Jarkko; Kosonen, Tuomas; Slemrod, Joel
    Abstract: We study a tax evasion response to car taxes in Finland, where used car importers overstate the mileage to reduce tax liability. First, we develop a tax evasion measure by comparing reported mileage upon import with subsequent information from vehicle inspections, and find that a decline in mileage — "missing miles" — occurs frequently. Second, we analyze a tax rate increase, and observe a reduction in the number of imported used cars, but only among non-evaders. Finally, we analyze an RCT informing some potential importers about a program of inspections that uncover true odometer readings, and the results suggest that thirdparty reporting reduces evasion.
    Keywords: car tax, tax evasion, enforcement measures, Social security, taxation and inequality, H21, H23, H26, C93,
    Date: 2019
  3. By: Eerola, Essi; Kosonen, Tuomas; Kotakorpi, Kaisa; Lyytikäinen, Teemu; Tuimala, Jarno
    Abstract: We study rental income tax compliance using a large-scale randomized fild experiment and register data with third-party information on the ownership of apartments. We analyze the responses of potential landlords to treatment letters notifying them of stricter tax enforcement, or providing simplifying information on filing practices for the rental income tax. We find that both types of letters caused an increase in the propensity to report rental income, with letters notifying landlords of the use of third-party information in tax enforcement having the strongest effect. Our research design also allows us to analyze different types of spillover effects in tax enforcement. We find an indication of positive reporting spillovers within the household, but do not find clear evidence of spillovers between landlords in local rental markets.
    Keywords: tax compliance, field experiment, rental market, Social security, taxation and inequality, H26, H31,
    Date: 2019
  4. By: Mussurov, Altay; Sholk, Dena; Arabsheibani, G. Reza
    Abstract: Informality is heterogeneous, dynamic and difficult to quantify; the formal–informal gap in earnings is one major component of it that we wish to examine. Using the 2013 Kazakhstan Labor Force Survey, we analyze the returns that formal and informal workers receive for a given set of characteristics and also use a matching technique to decompose the gap. We observe that in Kazakhstan, there is a substantial earnings gap in favor of formal workers and that a quarter of the gap remains unexplained. Our study also highlights the importance of matching-based decomposition and distributional analysis in explaining the differences in earnings between formal and informal workers.
    JEL: R14 J01
    Date: 2018–10–04
  5. By: Navarrete-Hernández, Pablo; Navarrete-Hernandez, Nicolas
    Abstract: The informal economy currently provides two out of three jobs worldwide, with waste-picking activities providing employment for millions of the poorest of society. Moreover, waste-picking could provide a sustainable solution for solving the waste management crisis that affects the 3 billion people lacking access to waste services. Governmental policies toward waste-pickers in particular, and the informal economy in general, have been fundamentally based on four policy approaches: (1) dualist and voluntarist, which proposes repressive policies against waste-picker activity and the expansion of formal solid waste management systems; (2) structuralist, which argues for weak supporting policies aimed at reinforcing waste-picker associations; (3) legalist, which promotes the competition of waste-picking with other recycling alternatives without government intervention; and (4) co-production, which supports waste-picking with local policies as a means of enhancing waste-pickers’ productivity. Both qualitative, and particularly quantitative evidence testing the impact of these four approaches is scarce. In this paper, we attempt to fill this gap in the literature by operationalizing concepts, building a waste-picker sustainable performance index, and estimating the impacts of these four competing policy approaches. An exploratory sequential design method is used to analyze data: first, a thematic analysis to examine 40 in-depth interviews, and then multiple linear regressions to analyze a census survey of 100 waste-pickers in four cooperatives in Santiago de Chile. Our empirical results suggest a positive association between the level of government support and waste-pickers’ sustainable performance. Consequently, further positive government intervention, particularly in supporting a stronger structural organization for the waste-picker recycling system, is advocated as the primary policy recommendation of this paper.
    Keywords: waste pickers; co-production; Santiago; recycling waste; management; informal economy
    JEL: R14 J01
    Date: 2018–01–01

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