nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2021‒03‒15
six papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Precarization or protection? The impact of trade and labour policies on informality By Rita K. Almeida; Lourenço S. Paz; Jennifer P. Poole
  2. Welfare and the depth of informality: Evidence from five African countries By Eva-Maria Egger; Cecilia Poggi; Héctor Rufrancos
  3. Heterogeneous informality in Costa Rica and Nicaragua By Enrique Alaniz; T. H. Gindling; Catherine Mata; Diego Rojas
  4. Do audits improve future tax compliance in the absence of penalties? Evidence from random Audits in Norway By Shafik Hebous; Zhiyang Jia; Knut Løyland; Thor O. Thoresen; Arnstein Øvrum
  5. Collaborative tax evasion in the provision of services to consumers: A field experiment By Doerr, Annabelle; Necker, Sarah
  6. The labour market impact of COVID-19 lockdowns: Evidence from Ghana By Simone Schotte; Michael Danquah; Robert Darko Osei; Kunal Sen

  1. By: Rita K. Almeida; Lourenço S. Paz; Jennifer P. Poole
    Abstract: Several episodes of market-oriented reforms in developing countries have been accompanied by a significant rise in work outside of the formal economy. This paper investigates whether the impact of increased exposure to trade on formal employment is mediated by the strength of labour regulations. We rely on data from the Brazilian Census which provides information on workers' demographics and employment, including job formality status.
    Keywords: Brazil, Informality, Trade, Regulation, Instrumental variable, Labour
    Date: 2021
  2. By: Eva-Maria Egger; Cecilia Poggi; Héctor Rufrancos
    Abstract: This study explores the relationship between household poverty and depth of informality by proposing a new measure of informality at the household level. It is defined as the share of activities (hours worked or income earned) without social insurance for wage workers in the household. We apply cross-sectional regressions to five urban sub-Saharan African countries, showing that a household head informality dummy obscures a non-linear relationship between the depth of household informality and welfare outcomes.
    Keywords: Informality, Measurement, Poverty, Social protection, Sub-Saharan Africa
    Date: 2021
  3. By: Enrique Alaniz; T. H. Gindling; Catherine Mata; Diego Rojas
    Abstract: Informal work is often considered a place of employment for marginalized and vulnerable workers who have been rationed out of preferred formal work. However, informality can also be seen as a dynamic sector that budding entrepreneurs and those looking for flexible working conditions enter voluntarily. We use the methodology developed in Günther and Launov (2012) to test for the voluntary and involuntary nature of informal work in Nicaragua and Costa Rica, without making ad hoc assumptions about labour market segmentation and self-selection.
    Keywords: Informality, Developing countries, Costa Rica, Nicaragua, Informal work, Labour market segmentation, Self-selection
    Date: 2021
  4. By: Shafik Hebous; Zhiyang Jia (Statistics Norway); Knut Løyland; Thor O. Thoresen (Statistics Norway); Arnstein Øvrum
    Abstract: The Norwegian Tax Administration operated multi-year random audits of personal income tax returns. We exploit this exceptional randomized setup to estimate the effects of tax audits on future compliance explicitly distinguishing between dynamic responses of compliant and noncompliant audited taxpayers. A priori, the literature has suggested two competing effects: A post-audit deterrence effect—whereby audits prompt taxpayers to comply in subsequent years—or a “bombcrater” effect—whereby audits lower taxpayers’ subjective probability of detecting future evasion and hence weaken compliance. Our results show improved future compliance for five post-audit years by those that were found noncompliant in the audits, despite the absence of penalty, suggesting that it is not the monetary payment per se that carries a deterrence effect. Those that were found compliant, however, show no signs of behavioral adjustments. Although the findings are consistent with the deterrence effect, mainly stemming from being caught of wrongdoing rather than a penalty, we argue that there is also a “learning” effect with the important implication that better information for taxpayers critically complements tax audits.
    Keywords: Tax administration; tax evasion; tax compliance; tax audits; administrative data
    JEL: H26 C23
    Date: 2020–11
  5. By: Doerr, Annabelle; Necker, Sarah
    Abstract: We conduct a field experiment with sellers of home-improvement services on two German online markets. We take the role of consumers and vary whether we request an invoice for the delivery of the service. In a market which allows anyone to sell anonymously, a willingness to evade is prevalent. In a market that keeps track of credentials, sellers are only willing to evade when a willingness to collude is signaled. The evasion discount is in most estimates not larger than the tax subsidy for legal demand. Evasion is unlikely to be beneficial for many consumers in our setting.
    Keywords: Collaborative tax evasion,evasion discount,undeclared work,third-party reporting,field experiment
    JEL: H26 C93 E26 J22 O17
    Date: 2021
  6. By: Simone Schotte; Michael Danquah; Robert Darko Osei; Kunal Sen
    Abstract: In this paper, we provide causal evidence of the impact of stringent lockdown policies on labour market outcomes at both the extensive and intensive margins, using Ghana as a case study. We take advantage of a specific policy setting, in which strict stay-at-home orders were issued and enforced in two spatially delimited areas, bringing Ghana's major metropolitan centres to a standstill, while in the rest of the country less stringent regulations were in place.
    Keywords: COVID-19, Lockdown, Employment, Informality, Ghana
    Date: 2021

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