nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2021‒12‒06
five papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Informal Workers and the State: The Politics of Connection and Disconnection During a Global Pandemic By Gallien, Max; van den Boogaard, Vanessa
  2. Vicious Circle or New Paradigm? Exploring the Impact of Shadow Economy on Labour Market in Latin America and Eurozone By Khorana, Sangeeta; Caram, Santiago; Biagetti, Marco
  3. Media negativity bias and tax compliance: Experimental evidence By Milos FiÅ¡ar; Tommaso Reggiani; Fabio Sabatini; JiÅ™í Å palek
  4. Financial determinants of informal financial development in Sub-Saharan Africa By Simplice A. Asongu; Valentine B. Soumtang; Ofeh M. Edoh
  5. Пенсионные реформы и теневой сектор: моделирование поведения доходных групп By Danielyan, Vladimir; Polterovich, Victor

  1. By: Gallien, Max; van den Boogaard, Vanessa
    Abstract: In low- and middle-income countries, informal workers are particularly vulnerable to the health and economic effects of the Covid-19 pandemic and often neglected by policy responses. At the same time, the crisis is rapidly changing the ways that states engage with informal workers. We argue that the relationships between informal workers and states – and the politics of creating and accessing these linkages – are a critical and frequently overlooked part of the politics of the pandemic. Both pre-existing structural disconnection from the state—embodied, for example, through limited access to health infrastructure—and state attempts to build new connections, including through cash transfer programmes for informal workers, have a profound impact on the effectiveness and reach of state crisis responses. Without considering the varied and dynamic nature of the linkages between states and informal workers we cannot understand the heterogeneous health and economic impacts of the pandemic, state capacity to respond to the crisis, or institutional change in the context of crisis.
    Keywords: Governance, Politics and Power, Work and Labour,
    Date: 2021
  2. By: Khorana, Sangeeta; Caram, Santiago; Biagetti, Marco
    Abstract: The relationship between shadow economy (or informal economy) and development has been extensively researched. But there is a lack of consensus on how institutional quality affects the size of informal economy in any country. Using the Kuznets Curve hypothesis we assess the relationship between institutional quality and the size of SE for a group of Latin American and Eurozone countries for 1991-2015. We examine the rationale of the 'exclusion' and 'escape' theories in short and long-run with the multiple indicators multiple causes (MIMIC) model. We use two techniques, namely an instrumental variable (IV) and Fully Modified OLS (FMOLS) approach. The results show positive and a significant relationship between labour productivity and the size of the shadow economy. We also find that the size of the informal sector is related to the institutional framework, and while the size of the informal sector varies across countries, both formal and informal sectors can co-exist in the long run. High corruption together with an excessive tax burden and adverse socio-economic conditions impact the size of the informal sector in an economy.
    Keywords: Shadow Economy,informal sector,development,cointegration,causality
    JEL: O17 O40 O43 C23 C26
    Date: 2021
  3. By: Milos FiÅ¡ar; Tommaso Reggiani; Fabio Sabatini; JiÅ™í Å palek
    Abstract: We study the impact of the media negativity bias on tax compliance. Through a framed laboratory experiment, we assess how the exposure to biased news about government action affects compliance in a repeated taxation game. Subjects treated with positive news are signicantly more compliant than the control group. Instead, the exposure to negative news does not prompt any signicant reaction compared to the neutral condition, suggesting that participants may perceive the media negativity bias in the selection and tonality of news as the norm rather than the exception. Overall, our results suggest that biased news provision is a constant source of psychological priming and plays a vital role in taxpayers' compliance decisions.
    Keywords: Tax compliance; Media bias; Taxation game; Laboratory experiment
    JEL: C91 D70 H26 H31
    Date: 2021–11
  4. By: Simplice A. Asongu (Yaounde, Cameroon); Valentine B. Soumtang (University of Yaoundé II, Cameroon); Ofeh M. Edoh (Yaoundé, Cameroon)
    Abstract: This study assesses financial determinants of informal financial sector development in 48 Sub-Saharan African countries for the period 1995-2017. Quantile regressions are used as the empirical strategy which enables the study to assess the determinants throughout the conditional distribution of informal sector development dynamics. The following financial determinants affect informal financial development and financial informalization differently in terms of magnitude and sign: bank overhead costs; net internet margin; bank concentration; return on equity; bank cost to income ratio; financial stability; loans from non-resident banks; offshore bank deposits and remittances. The determinants are presented from a plethora of perspectives, inter alia: U-Shape, S-Shape and positive or negative thresholds. The study not only provides a practical way by which to assess the incidence of financial determinants on informal financial sector development, but also provides financial instruments by which informal financial development can be curbed.
    Keywords: Informal finance; financial development; Africa
    Date: 2021–08
  5. By: Danielyan, Vladimir; Polterovich, Victor
    Abstract: We improve and investigate a dynamic model of the behavior of the population of agents belonging to different income groups during the transition from a pay-as-you-go to a mixed pension system. The model is based on the assumption that wealthier participants are characterized by a lower rate of income discount, which actually means an orientation toward a longer planning horizon. It provides a satisfactory approximation of the trajectories observed in Argentina after the pension reform of 1993, which is largely similar to the Russian reform of 2002. The model shows that as income increases, the proportion of representatives of the corresponding income group who prefer to "keep in the shadow" should decrease. This pattern is consistent with observations. The model explains why pension reforms in many countries have resulted in an expansion of the shadow sector. The impact of the minimum pension, the rate of return on pension savings and the retirement age on the levels of participation of different income groups in the pension system is studied.
    Keywords: pension reform, pay-as-you-go system, fully-funded system, retirement age, minimum seniority, informal sector, participation level
    JEL: D02 E02 H55 O43
    Date: 2021–11–14

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