nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2021‒06‒28
twelve papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Culture, Immigration and Tax Compliance By Antoine Malézieux; Benno Torgler
  2. Social Network and Tax Evasion: Theoretical Model and Empirical Evidence in Bangladesh By Kazi Abdul, Mannan; Khandaker Mursheda, Farhana; G M Omar Faruque, Chowdhury
  3. Socio-economic Factors of Tax Compliance: An Empirical Study of Individual Taxpayers in the Dhaka Zones, Bangladesh By Kazi Abdul, Mannan; Khandaker Mursheda, Farhana; G M Omar Faruque, Chowdhury
  4. Labour Laws, Informality, and Development: Comparing India and China By Simon Deakin; Shelley Marshall; Sanjay Pinto
  5. The More the Gloomier: development of informal employment and its effect on wages in Turkey By Duman, Anil; Duman, Alper
  7. Women at Work in the United States since 1860: An Analysis of Unreported Family Workers By Chiswick, Barry R.; Robinson, RaeAnn Halenda
  8. Transit Infrastructure and Informal Housing: Assessing an Expansion of the Medellin's Metrocable System By Posada, H; García-Suaza, A
  9. Spatial heterogeneity of housing prices in formal and informal settlements: A GWR hedonic model for segmented markets in Cali By Vivas, H; Franco, A
  10. Calidad del empleo agregado, formal e informal: un análisis para la economía colombiana en el periodo 2007 -2019 By Montoya, J; Jurado, A.
  11. Economía formal y economía informal: un estudio sobre la dinámica del crecimiento económico en un modelo de inspiración clásica By Tobón, A
  12. Efectos de corto plazo en el mercado laboral urbano By García-Suaza, A; Jaramillo, I; Londoño, D; Ortiz, S; Rodríguez-Lesmes, P

  1. By: Antoine Malézieux; Benno Torgler
    Abstract: Although understanding how multiculturalism shapes society is imperative in today's globalized world, insights on certain behavior domains remain limited, including those on tax compliance among domestic versus foreign taxpayers. Our meta-study of laboratory tax experiments analyzes over 50,000 tax declaration decisions by almost 5,000 subjects entailing 95 nationalities. Not only do immigrant participants exhibit signicantly less tax compliance than natives even with controls for numerous covariates, but tax compliance correlates positively with tax morale, which in turn also interacts signicantly with immigration status. Few variablesmainly linked to politicsinuenced the gap of compliance between natives and immigrants.
    Keywords: Tax evasion; Immigration; Meta-analysis
    JEL: C9 H0 H3
    Date: 2021–06
  2. By: Kazi Abdul, Mannan; Khandaker Mursheda, Farhana; G M Omar Faruque, Chowdhury
    Abstract: This paper examines ethical and behavioral aspects of taxpayers, the financial condition of citizens, tax fairness, taxpayer services, complexities in the tax regime, tax rates, penalties and enforcement, and tax amnesties and the black economy. Primary data were collected by conducting a survey utilizing structured printed questionnaires. Secondary data were collected from project reports, government publications and documents, books, journals, reports, newspapers and electronic media. Empirical findings suggest that all these issues are associated with tax evasion in Bangladesh. We also find that eligibility in a social network increases the likelihood that others will take-up. This suggests that taxpayers affect each other’s decisions about tax avoidance, highlighting the importance of accounting for social interactions in understanding enforcement and tax avoidance behavior, and providing a concrete example of optimization frictions in the context of behavioral responses to taxation. The involvement and nexus of the three actors in tax policy formulation, implementation and compliance processes were examined. The empirical findings indicate the presence of this nexus which facilitates tax evasion. The high magnitude of tax evasion in Bangladesh is significantly acknowledged by respondents in the study. The empirical findings suggest that the absence of a participatory policy making process, lack of research into, and reform of, the tax system, short-term oriented and politically motivated tax policies, loopholes, anomalies and complexities of tax laws and policies are responsible for creating scope for tax evasion.
    Keywords: Taxation, Social Network, Tax Evasion, Tax Avoidance, Network Centrality, Optimal Auditing, Network Model
    JEL: H2 H20 H21 H22 H24 H26 H7 H75
    Date: 2021
  3. By: Kazi Abdul, Mannan; Khandaker Mursheda, Farhana; G M Omar Faruque, Chowdhury
    Abstract: Tax compliance can be affected by many factors such as magnitude of compliance cost, the extent of penalty, perceived fairness of the tax system, awareness level of taxpayers and perceptions of government spending. The purpose of the study is identifying factors that affect compliance of individual income taxpayers in Bangladesh. The target population of the study is individual income taxpayers of the fifteen zones of Dhaka. The sample size is determined to 385 self-assessment assesse and 376 general procedure return submitted income taxpayers to which the questionnaire was distributed during the period of 1st December 2019 to 15th February, 2020. The results of the ordered logistic regression model reveal that the fairness, tax penalty and relationship with regard to taxpayer’s perception of government spending have positive and significant relationships with compliance. It also examines the effects of compliance decisions of referrals on others compliance decisions. The findings show a negative but insignificant relationship between them which implies that individual income taxpayer’s make their compliance decisions independent of others' decisions. Finally, the study having evaluated the effect of cost of complying with the tax law on tax compliance and concluded that there is a negative relationship between them implying that higher cost of compliance will lead to lower levels of compliance. Therefore, this paper suggests that maintaining tax fairness, optimum levels of penalty, spending the tax revenue on public development projects, keeping tax rates to the minimum as much as possible and keeping compliance costs to the minimum can enhance the compliance of taxpayers.
    Keywords: Taxation, Compliance, Socioeconomic, Fairness, Tax Penalty, Tax Rate, Awareness
    JEL: H2 H20 H21 H23 H24 H25 H26 H27
    Date: 2020
  4. By: Simon Deakin; Shelley Marshall; Sanjay Pinto
    Abstract: This paper explores trends in the formalisation and informalisation of work, focusing on the world’s two largest labour markets, India and China. A first task in is to define what is meant by informal work. The definitions used by international agencies are not uniform and different countries have distinct approaches. There are numerous dimensions to informality that are not fully captured in statistical data. There is a trend towards formal employment and away from own-account work and self-employment in many regions of the world, particularly in East Asia where the proportion of the labour force in waged employment has doubled over the past three decades. The paper will look more closely at the contrasting cases of India (where formal work has increased recently, but to a very small extent) and China (where a variant of the standard employment contract may be emerging), discuss reasons for the divergence between them, and consider the relationship between formality and developmental outcomes in the two countries.
    Keywords: Informality, labour laws, employment contract, India, China
    JEL: J46 J68 K31
    Date: 2020–03
  5. By: Duman, Anil; Duman, Alper
    Abstract: Various studies found wage gaps between formal and informal sector workers even after controlling for a number of individual and firm level characteristics. It has also been shown that earnings differentials across these sectors are quite stable over the years. While there is limited amount of research considering the same issues focusing on Turkish labor market, the development of wage gap between formal and informal employment has not been examined. In our paper, we carry this analysis for Turkey and estimate the wage gap between formal and informal sector workers by utilizing the Household Labor Force Survey (LFS) for the period of 2005 and 2019. There are three main findings; first, decline in informal employment is not uniform and especially after 2012 there is a slight increase in the share of informal jobs at the lower end of wage distribution. Second, we demonstrate that returns to informality vary significantly across quantiles even after a matching technique through inverse probability treatment weights are considered. While at the upper end of the distribution, the penalty is extremely small and stable over the years, at the bottom end, the informal sector considerably reduces wages, and the effect becomes larger over time. The negative and increasing penalty is observable well before the refugee inflows. The last part of our analysis looks at the occupational composition within formal and informal sectors over time and points out that the rise of white collar low skilled service (WCLS) jobs among informal employment is mainly responsible for the increasing wage gap for the workers at the bottom end.
    Keywords: wage gap,quantile regression,informal sector,compensation,skills,occupation
    JEL: J31 C31 O17 J46
    Date: 2021
  6. By: Dyah S. Pritadrajati; Anggita C. M. Kusuma; Sweta C. Saxena
    Abstract: Economic inactivity has long been seen to lead to the deterioration of future labor market prospects. This negative effect on future labor outcomes potentially lasts for the individual’s entire remaining working lifetime. Although there seems to be a consensus on the negative relationship between present spells of unemployment and future labor market outcomes, the literature discussing why and how this is the case, especially in developing countries, is limited. The challenges of labor market transitions are, without a doubt, complex, and the cases for developing countries could be different from those for developed countries. Therefore, to further extend the discussion in the literature, this paper attempts to investigate how self-employment in the informal sector, rather than unemployment per se, influences the scarring effects, especially in the context of Indonesia, where informality is prevalent. This paper finds that scarring effects due to previous unemployment and selfemployment are more observable among senior workers. Besides, there is also evidence of scarring effect due to self-employment among young workers age 25-34 years, which is more substantial than that due to unemployment. The estimation results show that the duration of unemployment negatively affects subsequent earnings, particularly for senior workers and workers in the lowincome group. In the meantime, years spent in self-employment has no significant effect on subsequent earnings, either when the sample is disaggregated by age, income distribution, gender, or location of residence. This evidence could indicate that the opportunity for human capital accumulation in self-employment is limited and/or employers may use this information as an indicator of low productivity.
    Keywords: scarring effect, human capital, unemployment, self-employment
    JEL: I25 I28 J24 J48
    Date: 2020
  7. By: Chiswick, Barry R. (George Washington University); Robinson, RaeAnn Halenda (George Washington University)
    Abstract: Estimated labor force participation rates among free women in the pre-Civil War period were exceedingly low. This is due, in part, to cultural or societal expectations of the role of women and the lack of thorough enumeration by Census takers. This paper develops an augmented labor force participation rate for free women in 1860 and compares it with the augmented rate for 1920 and today. Our methodology identifies women who are likely providing informal and unenumerated labor for market production in support of a family business, that is, unreported family workers. These individuals are not coded in the original data as formally working, but are likely to be engaged in the labor force on the basis of the self- employment of other relatives in their household. Unreported family workers are classified into four categories: farm, merchant, craft, and boardinghouse keepers. Using microdata, the inclusion of these workers more than triples the free female labor force participation rate in the 1860 Census from 16 percent to 57 percent, more than doubles the participation rate in the 1920 Census from 24 percent to 50 percent, and has a trivial effect on the currently measured rate of 56 percent (2015-2019 American Community Survey). This suggests that rather than a steep rise from a very low level in the female labor force participation rate since 1860, it has in fact always been high and fairly stable over time. In contrast, the effect of including unreported family workers in the male augmented labor force participation rate is relatively small.
    Keywords: women, labor force participation, unreported family workers, occupational status, unpaid workers, self-employment, 1860 Census, 1920 Census, American Community Survey
    JEL: N31 J16 J21 J82
    Date: 2021–06
  8. By: Posada, H; García-Suaza, A
    Abstract: Transportation policies have an important incidence on the allocation of resources within cities. Therefore, investigating the impacts of transit investment is relevant especially in developing countries where informal housing is highly prevalent and spatial disparities are remarkable. We study the impact of a transit expansion of the Metrocable system in Medellín (Colombia) as a natural scenario to understand the causal links between lowering access cost and informal housing. Using a difference-in-difference identification strategy, we estimate that the expasion of Line H of Metrocable reduces informal housing up to 15 percentage points. We also show that the magnitude of the effect depends on the distance to the intervention. When exploring potential mechanisms mediating the analyzed causal relation we find that the labor market plays a crucial role.
    Keywords: Informal housing; Transportation cost; Land value; Informal labormarket; Colombia
    JEL: R41 R42 R31 J46
    Date: 2021–04–20
  9. By: Vivas, H; Franco, A
    Abstract: This paper studies the factors associated with differential prices in segmented housing markets. Despite the breadth of the literature addressing this issue, a gap remains in the investigation of differential prices in areas where formal and informal settlements coexist. Based on primary data from more than 550 households, we calibrated a Geographically Weighted Regressions (GWR) hedonic model in the District 18 of Cali, Colombia, as an approach for housing pricing in areas where heterogeneous occupation patterns prevail. The findings reveal that environmental quality, violence, accessibility to transportation, business and services, and household incomes are the variables that have the greatest impact on price structures in both the formal and informal sub-markets. In this regard, the model of price behavior developed in this research improves predictions and provides accurate information to policymakers about the factors associated with housing prices.
    Keywords: Spatial heterogeneity; informal settlements; housing prices; Geographically WeightedRegressions (GWR); hedonic prices
    JEL: G28 R21 R28 R31 R38 R58
    Date: 2021–06–07
  10. By: Montoya, J; Jurado, A.
    Abstract: Este trabajo presenta una medida alternativa del nivel de empleo agregado, formal e informal para la economía colombiana entre 2007 y 2019, la cual permite obtener una medida alternativa de capital humano que es llamada calidad laboral. Uno de los principales resultados es que el nivel educativo tiene un impacto altamente positivo sobre la calidad laboral agregada y por sectores. En segundo lugar, se observan importantes diferencias en la calidad laboral entre los sectores formal e informal, las cuales aumentaron durante el periodo estudiado. En tercer lugar, se evidencia que la caída en la tasa de informalidad que se ha dado en el país ha tenido efectos positivos en la calidad laboral. Finalmente, se presenta una estimación de la Productividad total de factores (PTF), considerando esta medida alternativa del empleo.
    Keywords: Calidad laboral; Nivel de empleo agregado; Informalidad laboral; Ã ndice deDivisa; Contabilidad del crecimiento económico
    JEL: C43 E25 J24 O47
    Date: 2021–04–26
  11. By: Tobón, A
    Abstract: El objetivo de este documento de trabajo es mostrar las consecuencias de introducir el fenómeno de la informalidad en una modelo de inspiración clásica. La informalidad se introduce considerando un dualismo entre un sector formal que paga el impuesto sobre el beneficio bruto, y un sector informal que evade el pago de dicho impuesto, ante la incapacidad de enforcement por parte del gobierno. A medida que se imponen diferentes hipótesis sobre los impuestos, se puede estudiar la dinámica de la tasa de crecimiento de cada sector, de la tasa de beneficio de los empresarios y de los precios relativos de los bienes. Bajo ciertas condiciones, el modelo muestra una independencia entre las tasas de crecimiento sectoriales y la informalidad, razón por la cual un cambio en los impuestos no necesariamente altera la dinámica del crecimiento económico.
    Keywords: informalidad; sector informal; sector formal; impuestos; crecimientoeconómico
    JEL: E11 E26 E62 H26 H32
    Date: 2021–05–03
  12. By: García-Suaza, A; Jaramillo, I; Londoño, D; Ortiz, S; Rodríguez-Lesmes, P
    Abstract: La pandemia de COVID-19 ha registrado cambios en el mercado laboral sin precedentes en un lapso muy corto de tiempo. Durante 2020 se experimentó tanto el choque como una recuperación del empleo que puede terminar por generar una recomposición del mercado de laboral, y de nuevos patrones de desempleo que requieren políticas activas para reducir los impactos de la coyuntura. Considerando información de la encuesta de hogares, se realiza un estudio de los factores que marcaron una mayor vulnerabilidad del empleo, indagando en características como género, ocupación, condición de informalidad, entre otros. Los resultados obtenidos sugieren que las mujeres y el empleo no profesional han sufrido los mayores impactos. A esto se suma el hecho de que los empleos generados durante la recuperación presentan menores estándares de calidad. Por lo tanto, definen retos específicos a la agenda política pública del mercado de trabajo.
    Keywords: COVID-19; empleo; informalidad; empleo profesional
    JEL: E24 J24 J46
    Date: 2021–04–01

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