nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2021‒11‒22
five papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Tax compliance in post-transition: You and your friends matter, not the government By Natalia Levenko; Karsten Staehr
  2. Tax evasion, behavioral microsimulation models and flat-rate tax reforms. Analysis for Italy By Andrea Albarea; Michele Bernasconi; Anna Marenzi; Dino Rizzi
  3. COVID-19 and the Informality-driven Recovery: The Case of Colombia's Labor Market By Jorge Alvarez; Carlo Pizzinelli
  4. Cash: A Blessing or a Curse? By Fernando Alvarez; David Argente; Rafael Jimenez; Francesco Lippi
  5. Pagos electrónicos y uso del efectivo en los comercios colombianos 2020 By Carlos A. Arango-Arango; Yanneth Rocío Betancourt-García; Manuela Restrepo-Bernal; Germán Zuluaga-Giraldo

  1. By: Natalia Levenko; Karsten Staehr
    Abstract: This paper contributes to the literature that seeks to assess the importance of various theories on tax evasion by individuals. The various theories can be distinguished in detail using a very fine-grained survey of Estonian residents that was collected in three rounds from 2018 to 2020. Principal component analysis shows that the survey replies are mutually consistent and form distinct clusters that match key theories on tax evasion. Logit estimations of tax compliance use the principal components and various control variables as covariates. Theories of individual rational choice do not gain support. Factors associated with personal norms and with social norms and customs are important for tax compliance. Importantly, theories of reciprocity that depict a positive relation between approval of the government and tax compliance receive no support, possibly reflecting the wide spread of views on the role of government in post-transition Estonia. Sample splits reveal that the results apply broadly across various subsets of taxpayers. The results of the principal component regressions are corroborated by logit estimations where the survey variables enter individually
    Keywords: tax evasion, monetary and non-monetary motives, auditing, behavioural choice, norms and customs, reciprocity
    JEL: H26 H83
    Date: 2021–11–10
  2. By: Andrea Albarea (Department of Economics, University Of Venice CÃ Foscari); Michele Bernasconi (Department of Economics, University Of Venice CÃ Foscari); Anna Marenzi (Department of Economics, University Of Venice CÃ Foscari); Dino Rizzi (Department of Economics, University Of Venice CÃ Foscari)
    Abstract: It is sometimes argued that a flat-rate tax reform can reduce tax noncompliance. The argument is, however, inconsistent with the so-called Yitzhaki’ s puzzle of the classical expected utility (EU) model. The latter predicts an increase, rather than a reduction, in tax evasion following a cut in the tax rates resulting from a flat-rate reform. We study the impact of a flat-rate tax in a microsimulation tax-benefit model of Italy which allows us to analyse various hypotheses of tax evasion behavior. In addition to the EU model, we analyse expected utility with rank dependent probabilities (EURDP) and the model of reference dependent (RD) preference, the most favourable to overturn Yitzhaki’ s puzzle. Our simulations show that a flat-rate tax would barely reduce overall evasion in Italy in all models considered. Redistributive effects are in all cases large.
    Keywords: Fiscal reforms, tax evasion, reference dependent preferences
    JEL: H20 H26 H30
    Date: 2021
  3. By: Jorge Alvarez; Carlo Pizzinelli
    Abstract: This paper documents the impact of the COVID-19 pandemic and associated lockdowns on the Colombian labor market using household micro-data. About a quarter of employment was temporarily disrupted at the height of the first pandemic-induced lockdown in 2020. Women, the young, and the less educated were the most affected groups. Since then, a remarkable recovery, led by a rebound in informal employment, has taken place. By adjusting both employment levels and hours faster, the informal sector acted as an important margin of adjustment, particularly in those industries most affected by the first lockdown. The informal sector also appears to have played a role in decreasing the sensitivity of aggregate employment to more recent lockdowns in 2021, as the economy has learned to cope with pandemic restrictions, although the possibility of higher informality rates becoming embedded remains an substantial downside risk for long-term productivity.
    Keywords: Colombia, COVID-19, Labor Markets, Informality.
    Date: 2021–09–17
  4. By: Fernando Alvarez (University of Chicago); David Argente (Pennsylvania State University); Rafael Jimenez (University of Chicago); Francesco Lippi (LUISS University and EIEF)
    Abstract: We use two quasi-natural experiments that encouraged the use of debit cards and facilitated the use of ATMs in Mexico to estimate the elasticity of crime and informality to the availability of cash as means of payment. We then construct a simple model to quantify the private costs of restricting cash-usage in the economy. Our model captures the degree of substitution between cash and other payment methods at both the intensive and the extensive margins. We estimate the welfare effects of restricting cash by means of three key inputs: i) the elasticity of substitution between cash and credit, ii) the share of expenditures in cash by type of good obtained from detailed micro data, and iii) the elasticity of crimes to the availability of cash as means of payment. The social benefits of restricting cash usage are driven by the reduction of some criminal activities. The costs arise from the distortions that the anti-cash regulation imposes on the individual choices regarding the means of payment. We find that the private costs of heavily taxing the use cash outweigh the social benefits that we identify.
    Date: 2021
  5. By: Carlos A. Arango-Arango; Yanneth Rocío Betancourt-García; Manuela Restrepo-Bernal; Germán Zuluaga-Giraldo
    Abstract: Con el fin de estudiar la dinámica reciente de los pagos electrónicos en Colombia, el Banco de la República llevó a cabo en el año 2020 una encuesta al sector comercio en donde se analizan diferentes aspectos de la aceptación y uso de distintos instrumentos de pago. La encuesta revela altos niveles de aceptación de instrumentos de pago electrónicos frente a estudios anteriores, alcanzando el 50% de los comercios encuestados. Se destaca en particular una superación de barreras en la informalidad pues, uno de cada dos comercios informales acepta hoy en día alguna forma de pago electrónico. Dado el contexto en el que se llevó a cabo la encuesta, se realizó un módulo de preguntas relacionadas con el período de pandemia asociada al COVID-19, observándose que ésta ha favorecido la adopción de instrumentos y canales electrónicos por parte de los establecimientos de comercio para facilitar los pagos de los clientes, especialmente los no presenciales. A pesar de la creciente disponibilidad y aceptación de instrumentos y canales de pago electrónicos, el efectivo sigue dominando los pagos en las ventas de los comercios, principalmente por el bajo uso de estos medios electrónicos por parte de los consumidores. Por su parte, los comercios encuestados reportaron que el 77% de sus gastos de funcionamiento se hacen en efectivo y que las transferencias bancarias dominan los pagos electrónicos; siendo los micro comercios los que tienen la mayor dependencia del efectivo (95,7%), principalmente para hacer sus pagos de nómina. De esta manera, los resultados señalan que los pagos electrónicos siguen siendo bajos, a pesar de la creciente adopción de servicios de pago electrónicos. **** ABSTRACT: To study the recent dynamics of electronic payments in Colombia, Banco de la República carried out in 2020 a survey of the commerce sector on acceptance and usage of different payment instruments. The survey reveals merchants´ high levels of acceptance of electronic payment instruments compared to previous studies, reaching 50% of the businesses surveyed. Overcoming informality barriers stands out, since one out of every two informal businesses now accept electronic payments. Given the context in which the survey was carried out, it included a set of questions related to the COVID-19 pandemic. The results show that the pandemic has favored the adoption of electronic instruments and channels by merchants, facilitating customer payments, especially remote ones. Despite the increasing availability and acceptance of electronic payment instruments and channels, cash continues to dominate merchants´ sales, mainly due to the low use of electronic payment methods by consumers. On the other hand, the surveyed businesses reported that 77% of their operating expenses are made in cash and that bank transfers dominate their electronic payments. Micro-businesses have the greatest dependence on cash (95.7%) for their operational expenses like payroll. The results indicate that electronic payments remain low, despite the growing adoption of electronic payment services by merchants.
    Keywords: Efectivo, instrumentos de pago, pagos electrónicos, tarjetas de pago, comercios, Cash, payment instruments, electronic payments, payment cards, merchants
    JEL: C81 C83 D23 E41 E42 E58
    Date: 2021–11

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