nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2020‒12‒14
seven papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Informality and work status By Gary S. Fields
  2. Transforming informal work and livelihoods in China By Carl Shu-Ming Lin; Linxiang Ye; Wei Zhang
  3. By choice or by force?: Uncovering the nature of informal employment in urban Mexico By Robert Duval Hernández
  4. Offshore Tax Evasion and Wealth Inequality : Evidence from a Tax Amnesty in the Netherlands By Leenders, Wouter; Lejour, Arjan; Rabate, Simon; Riet, Maarten van ‘t
  5. Taxing Goods and Services in a Digital Era By David R. Agrawal; William F. Fox
  6. The Size of the Digital Economy in Finland and Its Impact on Taxation By Ali-Yrkkö, Jyrki; Koski, Heli; Kässi, Otto; Pajarinen, Mika; Valkonen, Tarmo; Hokkanen, Marja; Hyvönen, Noora; Koivusalo, Elina; Laaksonen, Jarno; Laitinen, Juha; Nyström, Enni
  7. Informalidad, ciclos económicos y política fiscal: una exploración de los nexos By García-Callejas, Danny; Granda-Carvajal, Catalina

  1. By: Gary S. Fields
    Abstract: The most important determinant of households' livelihoods is how much they earn for their labour. People in informal work are more likely to be low earners, to live in poverty, and to make fewer transitions into the higher-paying work statuses. The paper is divided into three main sections: what we mean by informality and work status, why we should differentiate between work statuses, and what we can learn by analysing work statuses and transitions between them.
    Keywords: informal work, work status, livelihoods, Poverty, transitions
    Date: 2020
  2. By: Carl Shu-Ming Lin; Linxiang Ye; Wei Zhang
    Abstract: The informal sector has long been viewed as a locus of the disadvantaged, unskilled, and inexperienced workers in under-developed and developing economies. Workers in the informal sector, however, can learn skills and gain experience that could help them switch to better-paying jobs in the formal sector. But evidence of this is limited. China constitutes an important case study because it is the most populous country and has the largest labour force, consisting of over 290 million rural-to-urban migrants whose employment is mostly informal.
    Keywords: China, Informal sector, livelihoods, Earnings
    Date: 2020
  3. By: Robert Duval Hernández
    Abstract: Using a special module of the 2015 Mexican Labour Force Survey with information on workers' preferences for jobs with social security coverage, I estimate that 80 per cent of informal workers in large urban areas would prefer to work in a job that provides them with such coverage. A discrete choice econometric model which distinguishes between wanting a formal job and the probability of getting one shows that schooling increases the chances of being hired in formal employment and of having higher earnings in it.
    Keywords: informal work, Labour market, Labour market segmentation, rationing, Informality
    Date: 2020
  4. By: Leenders, Wouter; Lejour, Arjan (Tilburg University, School of Economics and Management); Rabate, Simon; Riet, Maarten van ‘t
    Date: 2020
  5. By: David R. Agrawal; William F. Fox
    Abstract: Taxing consumption in the digital economy poses unique challenges for fiscal authorities. Recent institutional reforms, such as states changing remittance rules for the sales and use tax following the Supreme Court decision in South Dakota v. Wayfair, were enacted in order to increase tax revenue collections and create a more neutral tax system. Although these reforms induced more remote vendors to remit taxes on a destination basis, the revenue gains were modest, consistent with most large online vendors remitting taxes prior to the reforms. Instead, following the recent large shock to online shopping from the Covid-19 pandemic, the shift to destination-based taxation has redistributed revenues between large and small local jurisdictions. Increased online shopping raises revenue growth in small jurisdictions while contracting revenues in large jurisdictions. But, Wayfair is not the end of the story: technological changes that induce new consumption patterns, promise new challenges for fiscal authorities. Critical challenges for the next decades include limiting administrative and compliance costs of enforcing taxes in a digital world, determining filing thresholds, dealing with online marketplaces and facilitators, and taxing the consumption of digital services from two-sided platforms. With respect to digital services, we discuss whether consumption taxes should be imposed on both monetized platforms and non-monetized platforms such as social media, and the mechanisms for doing so.
    Keywords: sales tax, e-commerce, online shopping, enforcement, compliance, South Dakota v. Wayfair, consumption tax, digital services, platforms
    JEL: H20 H70 K30 L80 R50
    Date: 2020
  6. By: Ali-Yrkkö, Jyrki; Koski, Heli; Kässi, Otto; Pajarinen, Mika; Valkonen, Tarmo; Hokkanen, Marja; Hyvönen, Noora; Koivusalo, Elina; Laaksonen, Jarno; Laitinen, Juha; Nyström, Enni
    Abstract: Abstract This report sheds light on the size and composition of the digital economy in Finland and its impact on the tax gap and tax system. No generally agreed definition of digital economy exists, and only a few prior studies have assessed the size of the digital economy quantitatively. We measured the size of the digital economy by the value added generated by digitally produced goods and services. We first replicated the analysis of the US Bureau of Economic Analysis (BEA) using Finnish data by assessing the value added of fully digital products. Secondly, we also took into account in our calculations the value added of partly digital products. Our analysis shows that the share of value added generated by the digital economy in Finland has grown at a relatively slow pace during the 2010s. Our calculations indicate that the digital economy comprised 10.9% of the GDP in Finland in 2017, or over EUR 21 billion euros. We further aimed at assessing the size of the corporate income tax (CIT), the value added tax (VAT) and the personal income tax (PIT) gaps generated by the digital economy in Finland. An attempt to make a full CIT gap analysis failed due to the unavailability of industry-level national accounts data. Data on the accrued VAT from the most recent years was not available but the observations from the earlier years did not reveal tax gaps. Our data collected via a survey targeted at digital freelance workers hints that, in general, Finnish digital freelancers comply with taxation rather well and no notable PIT tax gap is generated.
    Keywords: Digitalization, Digital economy, Taxation, Tax gap
    JEL: H2 H26 O33 O5
    Date: 2020–12–01
  7. By: García-Callejas, Danny; Granda-Carvajal, Catalina
    Abstract: Este trabajo tiene como objetivos ofrecer una visión panorámica acerca de la economía informal, sus determinantes y principales características en el caso colombiano; y, también, explorar las consecuencias de este fenómeno a nivel macroeconómico, enfatizando en los posibles efectos de la informalidad sobre los rasgos específicos de los ciclos económicos en los países emergentes, particularmente en el comportamiento de la política fiscal en Colombia. Para ello, se efectúa una revisión de la literatura pertinente buscando establecer conexiones entre estos aspectos. Se concluye que la debilidad institucional del país no solo incide en una proporción considerable de la economía informal con respecto al PIB, sino que refuerza el impacto de esta sobre la postura procíclica (o desestabilizadora) de la política fiscal. En este sentido, se requiere que el gobierno ajuste sus instrumentos de política en torno a una senda estabilizadora a la par que promueva la formalización laboral y empresarial.
    Keywords: economía informal; ciclos económicos; política fiscal; Colombia
    JEL: E26 E32 E62 H30 O17
    Date: 2020–12

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