nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2020‒10‒19
five papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Tax Preferences and Optimal Income Taxation By Marcelo Arbex; Enlinson Mattos
  2. Framing and loss aversion in tax reporting behavior: Evidence from German income tax return data By Diller, Markus; Kühne, Daniela
  3. Non-Standard Employment and Wage Differences across Gender: a quantile regression approach By Duman, Anil
  4. The dynamism of the new economy: Non-standard employment and access to social security in EU-28 By Sonja Avlijaš
  5. Power, interest and insecurity: A comparative analysis of workplace dualization and inclusion in Europe By Arthur Corazza

  1. By: Marcelo Arbex (Department of Economics, University of Windsor); Enlinson Mattos (São Paulo School of Economics, Getulio Vargas Foundation)
    Abstract: We develop a two-agent model where agents have preferences over consumption, leisure, independent and interdependent tax preferences - personal (own tax payments) and interpersonal (average tax payments in the economy). We characterize the optimal labor income taxation under different assumptions regarding tax preferences (tax affinity, hostility, conformity and opposition). We find that tax preferences can either amplify or reduce the marginal tax increase of the low-ability type. When individuals can hide a fraction of their earnings at a resource cost, the link between consumption and tax payments is broken. Tax evasion affects the aggregate measure of taxes and what people take into account and care about when making their optimal decisions. We find that the trade-off associated with tax preferences and consumption have their effects intensified in the optimal low-ability income tax. With evasion, the marginal income tax of high-ability types is no longer zero - it is optimal to subsidize this type and avoid the mimicking of low-ability individuals.
    Keywords: Optimal taxation, Social preferences, Tax affinity, Pro-social behavior.
    JEL: D03 D60 H21 H23
    Date: 2020–10
  2. By: Diller, Markus; Kühne, Daniela
    Abstract: This paper investigates the presence of framing effects and loss aversion in tax reporting behavior of wage earners using a balanced panel of German income tax return data. Reference dependence and loss aversion suggest that individuals in a perceived loss situation attribute higher value to a given amount of positive change in outcome than individuals in a perceived gain situation do. Applied to tax reporting behavior, taxpayers who perceive their tax situation as unfavorable compared to a given reference point are expected to make greater effort or accept higher costs to prevent or reduce that perceived loss than taxpayers perceiving themselves to be in a favorable situation. Greater effort can in turn be associated with higher reporting aggressiveness. We identify a potential reference point in taxpayers' previous year's outcome and examine whether taxpayers claim higher additional tax deductions in a loss situation than in a gain situation. We use a difference-in-difference approach with a one-on-one matching strategy to analyze reporting behavior. We find that taxpayers in a loss situation claim higher income-related deductions than taxpayers in a gain situation.
    Keywords: loss aversion,framing,tax avoidance,nonbusiness tax
    JEL: D91 H24 H26
    Date: 2020
  3. By: Duman, Anil
    Abstract: The paper aims to identify the effect of non-standard employment on wages in the Turkish labour market across gender and decompose the gap to understand the role of endowments and returns in generating the earning differences. Our findings show that non-standard employment reduces wages for women at every quantile but no such results are attained for men. Besides, females with standard jobs in Turkey earn more than men, however, the opposite holds for females in non-standard positions. Also, a big part of the gender pay gap is attributable to returns, especially at the lower end of the distribution. Women in low-paid and atypical jobs face larger pay gaps, and the role of unexplained component suggests they are discriminated. The distinct impact of non-standard employment on men and women suggest that policies geared towards labour market flexibilisation should take gender perspective into account.
    Keywords: Non-standard employment,Gender pay gap,Quantile regressions,Recentered Influence Function (RIF),Decomposition,Discrimination
    JEL: J31 J24 J41
    Date: 2020
  4. By: Sonja Avlijaš
    Abstract: This paper examines the prevalence of non-standard workers in EU-28, rules for accessing social security, and these workers’ risk of not being able to access it. It focuses on temporary and part-time workers, and the self-employed, and offers a particularly detailed analysis of their access to unemployment benefits. It focuses on eligibility, adequacy (net income replacement rates) and identifies those workers which are at the greatest risk of either not receiving benefits or receiving low benefits. It offers a special overview of foreign non-standard workers, who may be particularly vulnerable due to the absence of citizenship in the host country. The paper also analyses access to maternity and sickness benefits for these three groups of workers, as well as their access to pensions. Its key contribution is in bringing together the different dimensions of disadvantage that non-standard workers face vis-à-vis access to social protection. This allows us to comprehensively assess the adaptation of national social security systems across EU-28 to the changing world of work over the past 10 years. The paper shows that there is a lot of variation between the Member States, both in the structure of their social security systems, as well as the prevalence of non-standard work. Most notably, the paper concludes that: i) access to unemployment benefits is the most challenging component of welfare state provision for people in non-standard employment; ii) policy reforms vis-à-vis access to social benefits have improved the status of non-standard workers in several countries, while they have worsened it in others, particularly in Bulgaria, Ireland and Latvia; iii) some Eastern European countries can offer lessons to other Member States due to their experiences with labour market challenges during transition and the subsequent adaptations of their social security systems to greater labour market flexibility. The paper also implies that a country’s policy towards nonstandard work cannot be examined in isolation from its labour market conditions, as well as its growth model, and that uniform policy solutions for non-standard work cannot be applied across EU-28.
    Keywords: non-standard workers, new economy, social security, unemployment benefit, maternity benefit, sickness benefit, income replacement convergence
    Date: 2019–02
  5. By: Arthur Corazza
    Abstract: In Europe’s ‘age of dualisation’, interest groups are key to contemporary political economy theory of insider-outsider divides, where only strategic, rational choice might explain a shift to inclusive representation. Yet, a recent and growing body of case studies argues that power dynamics shape preferences, strategies and, ultimately, workplace inequalities. This paper draws on theoretical developments to examine these competing hypotheses. In particular, it seeks to identify the conditions under which workplace-level representation moderates or reinforces subjective insecurity gaps between stable and atypical employment. Through an explanatory sequential mixed methodology, multi-level logistic regression using survey data maps out the set of EU28 political economies while a qualitative section compares two cases in depth. Overall, the findings reveal country clusters that support the power-based thesis, based on institutional and ideational resources, and run counter the rational choice argument. Integrated into the ‘vicious circle’ concept, adverse conditions specify endogenous relationships at a certain threshold, but can be disqualified as sine qua non catalysers. The paper therefore contributes to the ‘varieties of workplace dualisation’ literature, connecting the angle of employment relations with political economy research on inequalities.
    Keywords: Dualisation, atypical work, employment insecurity, industrial relations, political economy
    Date: 2020–02

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