nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2020‒10‒05
four papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Income Tax Evasion: Tax Elasticity, Welfare, and Revenue By Max Gillman
  2. Is Neoliberalism Still Spreading? The Impact of International Cooperation on Capital Taxation By Hakelberg, Lukas; Rixen, Thomas
  3. Informational Shocks and Street-Food Safety: A Field Study in Urban India By Daniele, Gianmarco; Mookerjee, Sulagna; Tommasi, Denni
  4. Mercados laborales, informalidad y protección para la vejez By Leonardo Villar

  1. By: Max Gillman (1 University Blvd; University of Missouri – St. Louis; St. Louis, MO 63121)
    Abstract: This paper provides a general equilibrium model of income tax evasion. As functions of the share of income reported, the paper contributes an analytic derivation of the tax elasticity of taxable income, the welfare cost of the tax, and government revenue as a percent of output. It shows how an increase in the tax rate causes the tax elasticity and welfare cost to increase in magnitude by more than with zero evasion. Keeping constant the ratio of income tax revenue to output, as shown to be consistent with certain US evidence, a rising productivity of the goods sector induces less evasion and thereby allows tax rate reduction. The paper derives conditions for a stable share of income tax revenue in output with dependence upon the tax elasticity of reporting income. Examples are provided with less and more productive economies in terms of the tax elasticity of reported income, the welfare cost of taxation and the tax revenue as a percent of output, with sensitivity analysis with respect to leisure preference and goods productivity. Discussion focuses on how the tax evasion analysis may help explain such fiscal tax policy as the postwar US income tax rate reductions with discussion of tax acts and government fiscal multipliers. Fiscal policy with tax evasion included shows how tax rate reduction induces less tax evasion, a lower welfare cost of taxation, and makes for a stable income tax share of output.
    Keywords: Optimal Evasion; Tax Law; Welfare; Tax Elasticity; Revenue; Productivity; Development.
    JEL: E13 H21 H26 H30 H68 K34 K42 O11
    Date: 2020–09
  2. By: Hakelberg, Lukas; Rixen, Thomas (Freie Universität Berlin)
    Abstract: The downward trend in capital taxes since the 1980s has recently reversed for personal capital income. At the same time, it continued for corporate profits. Why have these tax rates di-verged after a long period of parallel decline? We argue that the answer lies in different levels of change in the fights against tax evasion and tax avoidance. The fight against evasion by households progressed significantly since 2009, culminating in the multilateral adoption of automatic exchange of information (AEI). In contrast, international efforts against base ero-sion and profit shifting (BEPS) failed to curb tax avoidance by corporations. We theorize that international cooperation is an intervening variable, countering the negative impact of tax competition on capital taxation by reducing the risk of capital flight. Under such conditions, domestic political pressures in favor of higher capital taxes can unfold. We confirm our argu-ment in a difference-in-difference analysis and through additional tests with data for up to 35 OECD countries from 2000-2017. Our central estimate suggests that the average tax rate on dividends in 2017 is 4.5 percentage points higher than it would have been absent international tax cooperation.
    Date: 2020–04–25
  3. By: Daniele, Gianmarco (Bocconi University); Mookerjee, Sulagna (Binghamton University, New York); Tommasi, Denni (Monash University)
    Abstract: The street food market is a major source of food in developing countries, but is often characterized by unsafe food conditions. We investigate whether improvements in food safety can be achieved by providing information to vendors in the form of a training. Among randomly assigned groups of street-food vendors in Kolkata, India, we find large improvements in knowledge and awareness, but little change in their observed behavior. We provide two main explanations for these findings. First, information acquisition by itself does not make it significantly easier for vendors to provide customers with safer food options. Second, although consumers in this market have a positive willingness to pay for food that is perceived as more hygienic, they struggle to distinguish between safe and contaminated food. We conclude that information to vendors is not the key constraint in this context, and that policies mitigating supply-side constraints as well as improving food safety awareness among consumers are likely to have more impact.
    Keywords: food safety, public health, street-food, hawkers, trainings, RCT, informal sector
    JEL: O12 O17
    Date: 2020–09
  4. By: Leonardo Villar
    Abstract: Capítulo 11 del libro: Fedesarrollo: 50 años de influencia en política pública. Bogotá: Fedesarrollo - Leonardo Villar recoge y revisa las contribuciones que ha hecho Fedesarrollo en temas del mercado laboral, la informalidad y el sistema pensional a lo largo de las décadas. Adicionalmente, incluye algunas propuestas de reforma al sistema de protección económica para la vejez.
    Keywords: Mercado Laboral, Informalidad Laboral, Protección Económica a la Vejez, Pensiones de Jubilación, Sistema Pensional, Política Pública, Centros de Pensamiento, Fedesarrollo, Colombia
    JEL: J40 J46 H55 H75 J32 J48 L38 L31 I23
    Date: 2020–08–26

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