nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2020‒03‒16
seven papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Microentrepreneurship in Developing Countries By Jayachandran, Seema
  2. The impact of the formal employment contract on credit access in Africa By Samuel Monteiro
  3. Earnings gaps, Segmentation and Competitiveness in the Ghanaian Labour Market By Nimoh, Nana C.; Ali, Abdilahi; Syme, Tony
  4. Illicit financial flows: Artisinal and small-scale gold mining in Ghana and Liberia By OECD
  5. Media Bias and Tax Compliance: Experimental Evidence By Fišar, Miloš; Reggiani, Tommaso G.; Sabatini, Fabio; Špalek, Jiří
  6. Of Governance and Revenue : Participatory Institutions and Tax Compliance in Brazil By Touchton,Michael Ryan; Wampler,Brian; Peixoto,Tiago Carneiro
  7. Republic of Armenia; Technical Assistance Report-Strategic Choices for Tax Administration to Enhance Tax Compliance By International Monetary Fund

  1. By: Jayachandran, Seema (Northwestern University)
    Abstract: This article reviews the recent literature in economics on small-scale entrepreneurship ("microentrepreneurship") in low-income countries. Major themes in the literature include the determinants and consequences of joining the formal sector; the impacts of access to credit and other financial services; the impacts of business training; barriers to hiring; and the distinction between self-employment by necessity and self-employment as a calling. The article devotes special attention to unique issues that arise with female entrepreneurship.
    Keywords: small businesses, female entrepreneurship, self-employment, informal sector
    JEL: L26 J16 J24
    Date: 2020–01
  2. By: Samuel Monteiro (I&P - Investisseurs et Partenaires)
    Abstract: Utilizing a new database of over 200 employees surveyed in Senegal, we demonstrate the impact of formalization and employment contracts on credit access. Through a probit model, we show that formalization has a significantly positive impact on credit access since an employee's probability of accessing credit increases by 23% if they have a formal employment contract. The possession of an employment contract increases the likelihood of having a bank account by 18%. We find that other potential determinants studied in the existing literature, such as gender, education and salary, do not have a significant impact on access to credit. These results highlight the impact of formalization on credit access and make a strong case for the economic development that could result from a continuation of the efforts being undertaken to formalize African economies, which still remain predominantly informal.
    Keywords: Credit access,Formal job,Employment,Banking,Africa
    Date: 2020–02–27
  3. By: Nimoh, Nana C.; Ali, Abdilahi; Syme, Tony
    Abstract: This paper examines the labour market dynamics of Ghana by specifically assessing: (1) the informal-formal earnings gaps in the country, and (2) whether informal sector employment is due to labour market segmentation (i.e. last resort) or comparative advantage (voluntary). Our findings indicate that there are significant formal/informal earnings gaps in the Ghanaian labour market which is robust to industry and regional differences. Interestingly, we find that, even though males suffer earnings penalties within the informal sector, the penalty is much higher for females. Additionally, the study identifies the existence of two distinct segments within the informal labour market, each characterised by a different earnings profile. Thus, there is both segmentation and competitiveness within the informal labour market. Our results highlight the importance of designing appropriate policies that can tackle both voluntary and involuntary informal sector employment.
    Keywords: Informal labour market,finite mixture model,segmentation,comparative advantage,Ghana
    JEL: J46 O17 C14 N17
    Date: 2020
  4. By: OECD
    Abstract: Illicit financial flows (IFFs) generated by the artisanal and small-scale gold mining (ASGM) sector in West Africa have historically contributed to conflict and instability, although it would be a mistake to classify this issue as a criminal matter, given its links to formal and informal networks and local livelihoods. This study examines IFFs associated with the ASGM sector in Ghana and Liberia and reveals a complex web of informal and illicit activity associated with IFFs, with detrimental consequences for development. It focuses on gold because of its prominence in the West African Region and artisanal small-scale mining (ASM), rather than large-scale mining (LSM). Further, ASMG is largely informal and consequently more vulnerable to exploitation by criminal networks, and plays a prominent role as a local livelihood. This case study is relatively narrow in focus, providing insights into the nature and scope of ASGM activities and their resulting IFFs, and making several observations on those areas where action could be taken in an effort to reduce IFF risks. The study selected Ghana and Liberia as two countries where research could be conducted, and where gold is a major industry.
    Date: 2020–03–13
  5. By: Fišar, Miloš (Masaryk University); Reggiani, Tommaso G. (Cardiff University); Sabatini, Fabio (Sapienza University of Rome); Špalek, Jiří (Masaryk University)
    Abstract: We study the impact of media bias on tax compliance. Through a framed laboratory experiment, we assess how the exposure to biased news about government action affects compliance in a repeated taxation game. Subjects treated with positive news are significantly more compliant than the control group. The exposure to negative news, instead, does not prompt any significant reaction in respect to the neutral condition, suggesting that participants perceive the media negativity bias in the selection and tonality of news as the norm rather than the exception. Overall, our results suggest that biased news act as a constant source of psychological priming and play a vital role in taxpayers' compliance decisions.
    Keywords: tax compliance, media bias, taxation game, laboratory experiment
    JEL: C91 D70 H26 H31
    Date: 2020–01
  6. By: Touchton,Michael Ryan; Wampler,Brian; Peixoto,Tiago Carneiro
    Abstract: Traditionally, governments seek to mobilize tax revenues by expanding their enforcement of existing tax regimes and facilitating tax payments. However, enforcement and facilitation can be costly and produce diminishing marginal returns if citizens are unwilling to pay their taxes. This paper addresses gaps in knowledge about tax compliance, by asking a basic question: what explains why citizens and businesses comply with tax rules? To answer this question, the paper shows how the voluntary adoption of two different types of participatory governance institutions influences municipal tax collection in Brazil. Municipalities that voluntarily adopt participatory institutions collect significantly higher levels of taxes than similar municipalities without these institutions. The paper provides evidence that moves scholarship on tax compliance beyond enforcement and facilitation paradigms, while offering a better assessment of the role of local democratic institutions for government performance and tax compliance.
    Keywords: Tax Law,Tax Administration,Health Care Services Industry,Public Financial Management,Public Sector Economics,Public Finance Decentralization and Poverty Reduction,Economic Adjustment and Lending,Taxation&Subsidies,Macro-Fiscal Policy,Educational Sciences
    Date: 2019–03–28
  7. By: International Monetary Fund
    Abstract: This mission advised on strategic options to enhance tax compliance in Armenia. It complements the March 2018 tax administration mission, which provided the State Revenue Committee (SRC) with general guidance to develop and implement a compliance improvement framework.1 At the request of the authorities, this report focuses on the specific issues which continue to hamper effective compliance management, including the tax policy framework and the SRC’s business processes.
    Date: 2020–02–14

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