nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2021‒08‒30
six papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Learning and Product Innovation Performance in Informal Enterprises: Evidence from Urban Ghana By Avenyo, Elvis Korku
  2. Maternity benefits mandate and women's choice of work in Viet Nam By Khoa Vu; Paul Glewwe
  3. Import competition and informal employment: Empirical evidence from China By Wang, Feicheng; Liang, Zhe; Lehmann, Hartmut
  4. Tax Amnesties, Recidivism, and the Need for Reform By James Alm; Jay A. Soled
  5. Does voting on tax fund destination imply a direct democracy effect? By Nicolas Jacquemet; Stéphane Luchini; Antoine Malézieux
  6. Regulation and Informal Market for Schools in Delhi. By Bose, Sukanya; Ghosh, Priyanta; Sardana, Arvind; Boda, Manohar

  1. By: Avenyo, Elvis Korku
    Abstract: Recognising that enterprises learn how to produce goods and services in the informal economy, this paper examines the effect of two learning processes (apprenticeship and ‘formal interactions’) on the product innovativeness of informal enterprises in Ghana. Employing unique survey data on 513 enterprises and the Type II Tobit model, our analyses reveal that apprenticeship, on the one hand, enhances the technological capability of enterprises leading to product innovativeness, while competitive formal interactions, on the other hand, provide important market feedback that enhances the innovativeness of enterprises. The paper concludes by discussing the policy implications of these findings.
    Keywords: Innovation; Informal Sector; Learning; SMEs; Ghana; sub-Saharan Africa (SSA)
    JEL: D22 L25 L53 O12 O17 O31
    Date: 2021
  2. By: Khoa Vu; Paul Glewwe
    Abstract: Despite a sizeable literature on the labour market effects of maternity leave regulations on women in developed countries, how these policies affect women's work in developing countries with a large informal sector remains poorly understood. This study examines how extending the maternity leave requirement affects women's decisions to work in the informal or formal sector in Viet Nam. We use a difference-in-differences approach to evaluate the 2012 Amendment to the Viet Nam Labour Law, which imposes a longer maternity leave requirement than before.
    Keywords: Maternity, Women's work, Informal sector, Labour market
    Date: 2021
  3. By: Wang, Feicheng; Liang, Zhe; Lehmann, Hartmut
    Abstract: This paper investigates the effects of trade liberalisation induced labour demand shocks on informal employment in China. We employ a local labour market approach to construct a regional measure of exposure to import tariffs by exploiting initial differences in industrial composition across prefectural cities and then link it with the employment status of individuals. Using three waves of household survey data between 1995 and 2007, our results show that workers from regions that experienced a larger tariff cut were more likely to be employed informally. Further results based on firm-level data reveal a consistent pattern; tariff reductions increased the share of informal workers within firms. Such effects are more salient among smaller and less productive firms. Our findings suggest an important margin of labour market adjustment in response to trade shocks in developing countries, i.e. employment adjustment along the formal-informal dimension.
    Keywords: Trade liberalisation,Import competition,Informal employment,Firms,China
    JEL: F14 F16 F66 J46
    Date: 2021
  4. By: James Alm (Tulane University); Jay A. Soled (Rutgers University)
    Abstract: For years, governments have instituted and administered tax amnesty programs of various forms. At least as measured by the metric of revenue collections, some of these programs have proven successful and others have not. However, none of these many programs properly accounts for the issue of recidivism in a meaningful manner. To address this problem and to enhance long-term tax compliance outcomes, this analysis advocates that legislative governing bodies make tax amnesty programs a one-time option: taxpayers who participate in one tax amnesty program would be barred from subsequent tax amnesty participation offered by the same taxing jurisdiction involving the same type of tax.
    Keywords: Tax amnesty, tax compliance, recidivism
    JEL: H26 H31 H71 K42
    Date: 2021–08
  5. By: Nicolas Jacquemet (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Stéphane Luchini (CNRS - Centre National de la Recherche Scientifique, AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université); Antoine Malézieux (CEREN - Centre de Recherche sur l'ENtreprise [Dijon] - BSB - Burgundy School of Business (BSB) - Ecole Supérieure de Commerce de Dijon Bourgogne (ESC))
    Abstract: Does giving taxpayers a voice over the destination of tax revenues lead to more honest income declarations? Previous experiments have shown that giving participants the opportunity to select the organization that receives their tax funds tends to increase tax compliance. The aim of this paper is to assess whether this increase in compliance is induced by the sole fact of giving subjects a choice — a "direct democracy effect". To that aim, we ask participants to a tax evasion game to choose, in a collective or individual choice setting, between two very similar organizations which provide the same social (ecological) benefits. We elicit compliance for both organizations before the choice is made so as to control for the counter-factual compliance decision. We find that democracy does not increase compliance, and even observe a slight negative effect — in particular for women. Our results confirm the existence of a commitment effect of democracy, leading to favor more the selected organization when it was actively chosen. The commitment effect of democracy is however not enough to overcome the decrease in the level of compliance. Thanks to response times data, we show that prior choice on similar options as compared to a purely random selection weakens the preference for honesty. One important field application of our results is that democracy in tax spending must offer real choices to tax payers to improve compliance.
    Keywords: Commitment,Direct democracy effect,Voting,Tax evasion game
    Date: 2021–09
  6. By: Bose, Sukanya (National Institute of Public Finance and Policy); Ghosh, Priyanta (Gour Banga University); Sardana, Arvind (Social Science Group, Eklavya); Boda, Manohar (JNU)
    Abstract: The unrecognised school sector in Delhi has grown significantly over the years, and since long ceased to be marginal. The aim of the study is to understand the regulatory practice on the ground in this sector. According to the law, private schools must seek recognition from the appropriate authorities such that their functioning is aligned to public interest. Reading of the laws and an important Court case provides the background to the primary fieldwork on which the analysis is based. The results of the field survey indicate that unrecognised schools are growing unfettered. There is incentive for informality, regulation is totally absent and vested interests attempt to perpetuate the practice. The continuation of hands-off policy of the government vis-à-vis the sector despite the clear pronouncements in the Right to Education Act is explored from a variety of perspectives. Some suggestions towards formalisation are presented.
    Keywords: Low fee private schools ; unrecognised schools ; regulation ; informality in schooling ; educational policy ; educational law ; RTE.
    Date: 2021–08

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