nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2020‒03‒30
thirteen papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Fiscal Consolidations and Informality in Latin America and the Caribbean By Thibault Lemaire
  2. The Effects of Land Markets on Resource Allocation and Agricultural Productivity By Diego Restuccia; Chaoran Chen; Raul Santaeulalia-Llopis
  3. Urban Agglomerations and Employment Transitions in Ethiopia By Kamei,Akito; Nakamura,Shohei
  4. My mobile, my market: Mobile phone uses and economic performance in the informal sector in Dakar By Jean-Philippe Berrou; Francois Combarnous; Thomas Eekhout; Kevin Mellet
  5. The Impact of Declining Oil Rents on Tax Revenues: Does the Shadow Economy Matter? By Phoebe W. Ishak; Mohammad Reza Farzanegan
  6. Performance Assessment of Indian GST: State-level Analysis of Compliance Gap and Revenue Growth. By Mukherjee, Sacchidananda
  7. How to Improve Tax Compliance? Evidence from Population-wide Experiments in Belgium By De Neve, Jan-Emmanuel; Imbert Clement; Spinnewijn, Johannes; Tsankova, Teodora; Luts, Maarten
  8. Transferred Tax Knowledge to Improve Taxpayer Compliance By Kusumaningrum, Nurcahyaning Dwi; Hidayat, Rachmat; Wicaksono, Galih; Puspita, Yeni; Asmandani, Venantya; Pamungkas, Tree Setiawan; Susilo, Djoko
  9. Effect Of Using E-Filling On Quality Of Tax Reporting Services In East Java By Asmandani, Venantya; Pamungkas, Tree Setiawan; Hidayat, Rachmat; Wicaksono, Galih; Puspita, Yeni; Kusumaningrum, Nurcahyaning Dwi; Susilo, Djoko
  10. Short and Long-Run Labor Market Effects of Developing Country Exports : Evidence from Bangladesh By Robertson,Raymond; Kokas,Deeksha; Cardozo,Diego; Lopez-Acevedo,Gladys C.
  11. Poverty Measurement in the Era of Food Away from Home : Testing Alternative Approaches in Vietnam By Farfan Bertran,Maria Gabriela; Mcgee,Kevin Robert; Perng,Julie Ting Ting; Vakis,Renos
  12. Conflict and the Composition of Economic Activity in Afghanistan By Galdo, Virgilio; Lopez-Acevedo, Gladys; Rama, Martin
  13. A la recherche des « gazelles » du secteur informel urbain africain. Entreprises et entrepreneurs à fort potentiel dans leur environnement socioéconomique et numérique. By Jean-Philippe Berrou; Damien Girollet

  1. By: Thibault Lemaire (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UP1 - Université Panthéon-Sorbonne, Banque de France)
    Abstract: The transmission mechanisms of fiscal policy are significantly affected by informality in the labour market. Extending a narrative database of fiscal consolidations in 14 countries from Latin America and the Caribbean between 1989 and 2016 in order to account for heterogeneity in terms of commitment to the reforms, I show that tax-based and spending-based multipliers are both recessionary and do not significantly differ one from another in this region. Furthermore, these multipliers decline in absolute value as the level of labour informality increases in the economy, although evidences are less robust for spending-based consolidations. An analysis of the effects of tax-based consolidations on private demand suggests that labour market informality constitutes a short-term social buffer that attenuates the contractionary effects of this type of policy by increasing investment opportunities through tax evasion and entrepreneurial alternatives to unemployment for dismissed workers.
    Keywords: Fiscal consolidation,taxation,informality,emerging market economies
    Date: 2020–01
  2. By: Diego Restuccia; Chaoran Chen; Raul Santaeulalia-Llopis
    Abstract: We assess the effects of land markets on misallocation and productivity by exploiting effective variation in land rentals across time and space arising from a large-scale land certifcation reform in Ethiopia, where land remains owned by the state. Our main fnding from detailed micro panel data is that land rentals substantially reduce misallocation and increase agricultural productivity. Our evidence builds from an empirical difference-in-difference strategy and a calibrated quantitative macroeconomic framework with heterogeneous household-farms that replicates|without targeting|the empirical effects, an outcome that externally validates our model. The empirical effects are nonlinear|impacting more farms farther away from effcient operational scale, consistent with our theory. Further, counterfactual model experiments suggest that the land reform reduces income inequality, is relatively scalable and explains a sizeable proportion of the full extent of misallocation. Additional insights on the role of (in)formality in land markets and its effects on technology adoption are provided
    Keywords: Land markets, rentals, effects, misallocation, productivity, inequality, micro data, quantitative macro, informal markets, technology, fertilizers
    JEL: E02 O10 O11 O13 O43 O55 Q15 Q18 Q24
    Date: 2020–03–18
  3. By: Kamei,Akito; Nakamura,Shohei
    Abstract: Agglomeration boosts economic growth. A vast literature has empirically assessed the effects of agglomeration by estimating the city population elasticity on wages. This conventional approach is not necessarily suitable for analyzing urbanization at the early stage in developing countries, where a majority of urban workers engage in self-employment and/or informal jobs. Focusing on one of the poorest and largest among those countries, this paper sheds light on an aspect of urbanization and agglomeration: the transition in the mode of labor from self-employment/informal jobs to wage employment/formal jobs. Applying the instrumental variable approach to national labor force survey data sets, the analysis underscores several labor market transitions across space in urban Ethiopia. First, the town population size and the share of workers with wageemployment are strongly correlated. The probability of engaging in wage work increases by 4.5 percentage points with a log increase in population size. Second, this relationship is particularly strong among disadvantaged workers, such as the female, young, and/or less educated population. Finally, the study documents higher labor force participation and lower underemployment in larger towns.
    Keywords: Employment and Unemployment,Educational Sciences,Labor Markets,Inequality,Wages, Compensation&Benefits
    Date: 2020–03–13
  4. By: Jean-Philippe Berrou (LAM - Les Afriques dans le monde - CNRS - Centre National de la Recherche Scientifique); Francois Combarnous (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique); Thomas Eekhout (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique); Kevin Mellet (SENSE - Sociology and Economics of networks and Services - France Telecom R&D)
    Abstract: In sub-Saharan Africa, the vast majority of businesses belong to the so-called "informal" sector. As yet, little is known about their take up of the mobile phone, which suddenly and massively irrupted into their daily operations within less than a decade. This article, which is based on an original study of 500 entrepreneurs in the informal sector in Dakar, combines quantitative and qualitative methods. Its contribution is threefold. First, the study provides broad and detailed empirical insight into the adoption and use of mobile phones by informal entrepreneurs in sub-Saharan Africa. Second, the article draws on an original survey and analysis methodology to propose a robust and comprehensive typology of these entrepreneurs' business uses of mobile phones. Finally, it provides a statistical analysis of the relationship between mobile phone uses and economic performance. Ultimately, this article seeks to contribute to a better understanding of the informal sector and its specific dynamics.
    Abstract: En Afrique subsaharienne, l'immense majorité des entreprises appartiennent au secteur dit « informel ». On sait encore peu de choses sur la façon dont elles se sont emparées du téléphone mobile, qui a fait une brusque et massive irruption dans leur quotidien en moins d'une décennie. S'appuyant sur une enquête originale mêlant méthodes quantitatives et qualitatives, auprès de 500 entrepreneurs du secteur informel de Dakar, l'article apporte trois contributions principales. Premièrement, l'enquête apporte un éclairage empirique ample et détaillé sur l'adoption et les usages du mobile par les entrepreneurs informels d'Afrique subsaharienne. Deuxièmement, l'article propose une typologie robuste et compréhensive des usages professionnels du mobile par ces entrepreneurs, à partir d'une méthodologie d'enquête et d'analyse originale. Enfin, l'article restitue une analyse statistique des relations entre usages du mobile et performances économiques. Il s'agit in fine de contribuer à une meilleure connaissance du secteur informel et de ses dynamiques propres.
    Date: 2020
  5. By: Phoebe W. Ishak; Mohammad Reza Farzanegan
    Abstract: We study the association between oil rents and tax revenues, highlighting the importance of the shadow economy as a mediating factor. We present a simple theoretical model demonstrating that decreasing oil rents are likely to be positively associated with the tax revenues in a country with a moderate size of shadow economy. Declining oil rents may not lead to higher tax efforts of the state if the shadow economy is sizable. Using a sample of 124 countries from 1991 to 2015, our panel data regression analysis illustrates the moderating role of the shadow economy in the final effect of negative oil rents shocks on the tax revenues. A decline in oil rents following negative oil price shocks cease to have any significant positive impact on tax revenues in countries with shadow economy representing more than 35% of GDP. The results are robust after controlling country and year fixed effects, other determinants of tax revenues and using a dynamic model.
    Keywords: shadow economy, tax revenues, oil rents, resource curse
    JEL: Q32 Q35 H26 O17
    Date: 2020
  6. By: Mukherjee, Sacchidananda (National Institute of Public Finance and Policy)
    Abstract: Revenue from Goods and Services Tax (GST) is not meeting budgetary targets for last two financial years and therefore it is important to understand the reasons behind shortfall in GST collection. Any shortfall in GST collection will not only impact fiscal management of the union government but also it will spill over to state finances in terms of lower tax devolution. Structural changes made in the GST, in terms of increasing GST threshold and reducing tax rates for a large number of goods and services may have helped to moderate the impact of GST on Indian economy, but the revenue impact of the policy decisions cannot be negligible. In addition, revenue impacts of changes made in administrative provisions and procedures in GST require assessment for future policy directions. Moreover, tax compliance under GST is not improving over time and therefore it is further delaying stabilization of GST. There are many challenges that tax administrations (both union and state tax authorities) are facing today in terms of complexities of GST Rules and Regulations and getting access to information for effective tax administration. Given the revenue importance of GST in overall public finance management in India, in-depth understanding the reasons for revenue shortfall could help the government devise policies to overcome the challenges. The challenges before Indian GST can be classified into design and structural aspects of GST and tax administration and compliance related. In this paper we assess compliance and revenue performance of states in GST and estimate GST compliance gap.
    Keywords: Goods and Services Tax (GST) ; GST Compliance ; Revenue Assessment of GST ; Compliance Gap Analysis ; GST Evasion ; Indian States
    Date: 2020–03
  7. By: De Neve, Jan-Emmanuel (University of Oxford); Imbert Clement (University of Warwick); Spinnewijn, Johannes (London School of Economics); Tsankova, Teodora (University of Warwick); Luts, Maarten (FPS Finance)
    Abstract: We study the impact of simplification, deterrence and tax morale on tax compliance. We ran five natural field experiments varying the communication of the tax administration with the universe of income taxpayers in Belgium throughout the tax process. A consistent picture emerges across experiments: (i) simplifying communication substantially increases compliance, (ii) deterrence messages have an additional positive effect, (iii) invoking tax morale is not effective, and often backfires. A discontinuity in enforcement intensity, combined with the experimental variation, allows us to compare simplification with standard enforcement measures. We find that simplification is far more cost-effective, allowing for substantial savings on enforcement costs.
    Keywords: Tax Compliance ; Field Experiments ; Simplification ; Enforcement JEL codes: C93 ; D91 ; H20
    Date: 2020
  8. By: Kusumaningrum, Nurcahyaning Dwi; Hidayat, Rachmat; Wicaksono, Galih (Universitas Jember); Puspita, Yeni; Asmandani, Venantya; Pamungkas, Tree Setiawan; Susilo, Djoko
    Abstract: The purpose of research to know the influence of the taxpayer science level on the compliance of paying taxes by taxpayers, among others: knowledge of tax law, system knowledge and taxation functions, and the knowledge of sanctions Taxation both partially and simultaneously. Data analysis methods use SPSS software with a linear regression analysis, which is used to test the hypothesized influence of the taxpayer's level of science to pay tax compliance by both partial and simultaneous taxpayers and See the magnitude of the coefficient. Based on the results the study concluded that in partial and simultaneous levels of taxpayer enforcement science has a significant effect on the compliance of paying taxes by taxpayers.
    Date: 2020–02–12
  9. By: Asmandani, Venantya; Pamungkas, Tree Setiawan; Hidayat, Rachmat; Wicaksono, Galih (Universitas Jember); Puspita, Yeni; Kusumaningrum, Nurcahyaning Dwi; Susilo, Djoko
    Abstract: The purpose of this research is to determine the use of e-filling of the quality of tax Reporting Services partially. This research used quantitative methods and data analysis methods use SPSS software with simple regression analysis, which is used to test tested hypotheses, partially, and to see the magnitude of the coefficient. Based on the results of research and discussion can be concluded that partial use of e-filling affects the quality of the annual tax reporting Service, the direction is positif and is proven in analysis of SPSS test results with a significance value of 0.037 < from 0.05. More and more users of e-filling then increasing the quality of taxation services because the taxpayer feels comfortable and safe using e-filling for payment and reporting its exposure.
    Date: 2020–02–12
  10. By: Robertson,Raymond; Kokas,Deeksha; Cardozo,Diego; Lopez-Acevedo,Gladys C.
    Abstract: This paper studies how a positive export shock -- the sharp increase in garment-sector exports that began at the end of the Multifibre Arrangement (MFA) -- spread through Bangladesh's labor markets. Although the end of the MFA was arguably exogenous to Bangladesh, the authors instrument export demand with OECD imports to ensure identification. The paper compares estimates of the local labor market effects (wages and informality) and estimates from wage equations that reflect the predictions from long-run, general-equilibrium neoclassical trade theory. As in other studies, this paper finds that the export shock was localized both in terms of sector and geography. Wages increased and informality decreased in sub-districts more exposed to the export shock. Unlike in other studies, these local labor market effects dissipate quickly. Furthermore, Bangladesh's export shock was sector specific, limited predominantly to the female-intensive garment and textile sector. The paper shows that, following the increase in exports of the female-intensive good, the male-female wage gap closes considerably throughout the country -- not just in the apparel sector. In relatively small Bangladesh, the national labor market seems to be more integrated compared to larger countries studied, possibly suggesting that labor adjustment costs are lower in smaller countries.
    Date: 2020–03–09
  11. By: Farfan Bertran,Maria Gabriela; Mcgee,Kevin Robert; Perng,Julie Ting Ting; Vakis,Renos
    Abstract: Food consumed outside the home in restaurants or other food establishments is a growing segment of consumption in many developing countries. However, the survey methods that are utilized to collect data on expenditures on food away from home are often simplistic and could potentially result in inaccurate reporting. This study addresses the potential inaccuracy of commonly used methods and tests potentially superior methods to inform best practices when collecting data on consumption of food away from home. A household survey experiment was implemented in Hanoi, Vietnam, to test these different methods. Using a food away from home consumption diary as a benchmark, the study finds that many of the alternative methods considered -- including asking about consumption in one line (the existing practice in Vietnam) or asking each individual about their food away from home -- lead to underreporting (33 and 22 percent underestimates, respectively). Surprisingly, using one respondent and helping them with recall with a simple worksheet as well as bounding (two-visits) results in food away from home estimates that are indistinguishable from those reported in the benchmark diary. This finding implies that there is a more cost-effective way to collect accurate data on food away from home than an intensive daily diary. Furthermore, it highlights the inaccuracy associated with collecting data on consumption of food away from home from a single question in a survey. Although limited analysis can be conducted on the implications for poverty, the study finds that the profiles of the poorest households differ across different methods of collecting information on food consumed away from home.
    Keywords: Inequality,Educational Sciences,Labor&Employment Law,Health Care Services Industry,Urban Governance and Management,Urban Housing and Land Settlements,Municipal Management and Reform,Urban Housing
    Date: 2019–01–08
  12. By: Galdo, Virgilio (World Bank); Lopez-Acevedo, Gladys (World Bank); Rama, Martin (World Bank)
    Abstract: Despite informality being the norm in conflict-affected countries, most estimates of the impact of conflict on economic activity rely on formal sector data. Using high-frequency data from Afghanistan, this paper assesses how surges in conflict intensity affect not only the formal sector, but also informal and illicit activities. Nighttime light provides a proxy for aggregate economic activity, mobile phone traffic by registered firms captures fluctuations in formal sector output, and the land surface devoted to poppy cultivation gives a measure of illicit production. The unit of observation is the district and the period of reference is 2012–16. The same dynamic specification and controls are used for the estimation in the three cases, making the results comparable across sectors. Controls include the presence of combat troops and the level of foreign aid at the local level, which both influence local living standards in Afghanistan. The results show that an increase in conflict-related casualties has a strong negative impact on formal economic activity in the following quarter and a positive effect on illicit activity after two quarters. The impact on aggregate economic activity is negative, but more muted.
    Keywords: Afghanistan, conflict, economic activity
    JEL: D74 E21 F35 I32 O17
    Date: 2020–03
  13. By: Jean-Philippe Berrou (LAM - Les Afriques dans le monde - CNRS - Centre National de la Recherche Scientifique); Damien Girollet (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique)
    Date: 2019

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