nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2021‒03‒01
seven papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Trade and Informality in the Presence of Labor Market Frictions and Regulations By Rafael Dix-Carneiro; Pinelopi K. Goldberg; Costas Meghir; Gabriel Ulyssea
  2. Nudges and Threats: Soft vs Hard Incentives for Tax Compliance By Andersson, Henrik; Engström, Per; Nordblom, Katarina; Wanander, Susanna
  3. The $100 Million Nudge: Increasing Tax Compliance of Businesses and the Self-Employed using a Natural Field Experiment By Justin E. Holz; John A. List; Alejandro Zentner; Marvin Cardoza; Joaquin Zentner
  4. Tax and compliance of individual taxpayer By Meda Andini; Alfa Rahmiati
  5. National Pride and Tax Compliance: A Laboratory Experiment Using a Physiological Marker By Alison Macintyre; Ho Fai Chan; Markus Schaffner; Benno Torgler
  6. Factores determinantes de la transición entre los sectores formal e informal en México, 2010 y 2017 By Alí Miguel Arrieta-Arrieta; Carlos Alberto Marrugo-Arnedo
  7. Migración, formas de financiación e informalidad en la frontera colombo-venezolana By Gustavo Adolfo Díaz Valencia; Álvaro Andrés Vernazza Páez; Javier Deaza Chaves

  1. By: Rafael Dix-Carneiro (Duke University); Pinelopi K. Goldberg (Cowles Foundation, Yale University); Costas Meghir (Cowles Foundation, Yale University); Gabriel Ulyssea (University College London)
    Abstract: We build an equilibrium model of a small open economy with labor market frictions and imperfectly enforced regulations. Heterogeneous ï¬ rms sort into the formal or informal sector. We estimate the model using data from Brazil, and use counterfactual simulations to understand how trade affects economic outcomes in the presence of informality. We show that: (1) Trade openness unambiguously decreases informality in the tradable sector, but has ambiguous effects on aggregate informality. (2) The productivity gains from trade are understated when the informal sector is omitted. (3) Trade openness results in large welfare gains even when informality is repressed. (4) Repressing informality increases productivity, but at the expense of employment and welfare. (5) The effects of trade on wage inequality are reversed when the informal sector is incorporated in the analysis. (6) The informal sector works as an “unemployment,†but not a “welfare buffer†in the event of negative economic shocks.
    JEL: F14 F16 J46 O17
    Date: 2021–01
  2. By: Andersson, Henrik (Uppsala University); Engström, Per (Uppsala University); Nordblom, Katarina (Department of Economics, School of Business, Economics and Law, Göteborg University); Wanander, Susanna (The Swedish Tax Agency)
    Abstract: We study what induces delinquent taxpayers to pay their taxes due. We use high quality administrative data from the Swedish Tax Agency. We find a strong effect of the standard enforcement regime: a threat of having the debt handed over to the Enforcement Agency increases payments by roughly 10 percentage points. When including actual enforcement, payment increases by around 20 percentage points compared to those who do not risk enforcement. In a field experiment, we compare these effects of standard enforcement to those of much milder nudges, consisting of letters reminding tax delinquents to pay their taxes due. We find that a “pure nudge”, i.e., the inclusion of an extra piece of paper with no valuable information, has an effect of 7-8 percentage points for those who do not risk enforcement upon non-payment. However, the same nudge has no detectable effect for the group at risk of enforcement. Social-norm messages in turn increase payments both for those who risk enforcement and for those who do not, but to a much smaller degree. We also find that a pure nudge works much better for those who receive a physical letter than for those who receive information electronically, while the reaction to the social-norm nudge is significant for those who get the electronic information.
    Keywords: tax compliance; RCT; nudge; quasi-experiment; regression discontinuity
    JEL: C21 D03 D91 H24 H26
    Date: 2021–02
  3. By: Justin E. Holz (University of Chicago - Harris School of Public Policy); John A. List (University of Chicago - Department of Economics; NBER); Alejandro Zentner (University of Texas at Dallas - Naveen Jindal School of Management); Marvin Cardoza (Direccion General de Impuestos Internos); Joaquin Zentner (Inter-American Development Bank)
    Abstract: This paper uses a natural field experiment to examine the effectiveness of specific nudges on tax compliance amongst firms and the self-employed in the Dominican Republic. In collaboration with the Dominican Republic’s tax authority, we designed messages for more than 28,000 self-employed workers and over 56,000 firms. Leveraging administrative tax data, we find evidence that our nudges (increasing the salience of prison sentences or public disclosure of tax evaders) have large effects on increasing tax compliance, primarily working through the channel of decreasing claimed tax exemptions. Interestingly, we find that firms are more impacted than the self-employed, and that firm size is critically linked to nudge effectiveness: larger firms are considerably more influenced by nudges than smaller firms. We find this latter result noteworthy given the paucity of evidence showing significant behavioral impacts of nudges amongst the largest players in a market. Overall, our messages increased tax revenue by $193 million (roughly 0.23% of the Dominican Republic’s GDP in 2018), with over $100 million constituting income that the government would not have received without our field experimental nudges.
    JEL: C93 H2 H26
    Date: 2020
  4. By: Meda Andini (Airlangga University); Alfa Rahmiati (Airlangga University)
    Abstract: This study aims to obtain empirical evidence about the relationship between income level, tax sanctions, and trust in government with individual taxpayer's compliance through tax morale. This study is designed as a quantitative, and the data analysis used is path analysis. The research sample was 100 individual taxpayers in Pamekasan Regency. We are using path analysis techniques with the help of SPSS software. The results of this study are the income level has a relationship with individual taxpayer's compliance through tax morale, but tax sanctions and trust in the government do not have a relationship with individual taxpayer's compliance through tax morale. The limitation of this research is that the research scope is still limited, only in Pamekasan Regency. Further research related to tax morale can add other independent variables and expand the research sample's scope.
    Keywords: Income level,tax sanctions,trust in government,tax morale,individual taxpayer's compliance
    Date: 2020
  5. By: Alison Macintyre; Ho Fai Chan; Markus Schaffner; Benno Torgler
    Abstract: This paper reports on a laboratory experiment designed specifically to test the influence of national pride on tax honesty while using a physiological marker to observe emotional responses to patriotic priming. Participants were exposed to one of three framing videos before earning income in a real effort task, and at each of 20 rounds (years) were given the chance to declare their taxable income. We find that psychological priming through exposure to symbols of Australian national pride and national identity had a positive effect on the level of tax compliance among Australian but not non- Australians. In addition, non-Australians report lower tax compliance ratios in the treatment groups than in the control group which may indicate an outgroup effect. When exploring the potential of a physiological marker of national pride we observe two different types of physiological responses to the activation and effects of national pride and its impact on tax compliance among Australians. Iconic images activate the parasympathetic nervous system while sports scenes activate the sympathetic nervous system, but both types of images and responses are positively associated with tax compliance. In addition, we find that non-Australians resident in the country for more than a year report a higher level of tax compliance, and that there are some similarities in heart rate variability (HRV) responses between Australian citizens born in the country and those born overseas who have been in Australia for a longer period. Overall, the results support the proposition that identifying with an ingroup at a national level is important for tax compliance.
    Keywords: National pride; Tax compliance; Heart rate variability; Laboratory experiment
    JEL: C91 H26 D91 C88
    Date: 2021–02
  6. By: Alí Miguel Arrieta-Arrieta; Carlos Alberto Marrugo-Arnedo
    Keywords: informalidad, formalidad, transición, México.
    Date: 2020–12–18
  7. By: Gustavo Adolfo Díaz Valencia; Álvaro Andrés Vernazza Páez; Javier Deaza Chaves
    Keywords: informalidad, migración, tasa de cambio, contrabando, frontera.
    JEL: O17 R11 R23
    Date: 2020–12–18

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