nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2021‒09‒06
three papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Welfare effects of unemployment benefits when informality is high By Liepmann, Hannah.; Pignatti, Clemente.
  2. A Solution to the estimation of an Enlarged GDP Including Domestic Production: An Estimation on Micro Data By François Gardes
  3. The Revenue Administration Gap Analysis Program: An Analytical Framework for Personal Income Tax Gap Estimation By International Monetary Fund

  1. By: Liepmann, Hannah.; Pignatti, Clemente.
    Abstract: We analyze for the first time the welfare effects of unemployment benefits (UBs) in a context of high infor- mality, exploiting matched administrative and survey data with individual-level information on UB receipt, formal and informal employment, wages and consumption. Using a difference-in- differences approach, we find that dismissal from a formal job causes a large drop in consumption, which is between three to six times larger than estimates for developed economies. This is generated by a permanent shift of UB re- cipients towards informal employment, where they earn substantially lower wages. We then exploit a kink in benefits and show that more generous UBs delay program exit through a substitution of formal with informal employment. However, the disincentive effects are small and short-lived. Because of the high insurance value and the low efficiency costs, welfare effects from increasing UBs are positive for a range of values of the coefficient of relative risk aversion.
    Date: 2021
  2. By: François Gardes (Centre d'Economie de la Sorbonne, Paris School of Economics & Western Catholic University)
    Abstract: Using a generalization of the Becker's time allocation model to estimate the shadow price of time, the article proposes to evalutate the component of home production which could be substituted by market goods and services. An enlarged households' total expenditure including the production of the informal sector and the value of domestic production and the corresponding enlarged GDP are compared to their monetary counterparts in five developed and under-developed countries. Domestic production substituable to market goods corresponds to 23 to 41% of the GDP in Canada, France, Poland and the US, but much less in Burkina Faso because of much lower opportunity cost of time and elasticity of substitution. Finally, the enlarged GDP including the informal sector is larger by 40% than the official GDP in the three developed countries, 34% in Poland and by 54% in Burkina Faso
    Keywords: Domestic Production; Time Allocation; GDP; Opportunity Cost of Time
    JEL: D31 J22
    Date: 2021–03
  3. By: International Monetary Fund
    Abstract: It is generally difficult to measure revenue not collected due to noncompliance, but a growing number of countries now regularly produce and publish estimated revenue losses. Good tax gap analysis enables the detection of changes in taxpayer behavior by consistent estimates over time. This Technical Note sets out the theoretical concepts for personal income tax (PIT) gap estimation, the different measurement approaches available, and their implications for the scope and presentation of statistics. The note also focuses on the practical steps for measuring the PIT gap by establishing a random audit program to collect data, and how to scale findings from the sample to the population.
    Keywords: Tax Administration; Tax Compliance; Personal Income Tax; Tax Gap; Tax Avoidance; Tax Evasion; Random Audit Program; Shadow Economy; Non-Observed Economy; PIT gap; Personal Income Tax gap estimation; publication order; gap estimate; taxpayer registry data; Auditing; Revenue Administration Gap Analysis Program (RA-GAP)
    Date: 2021–08–27

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