nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2021‒12‒20
four papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Minimum wage spike and income underreporting: a back-of-the-envelope-wage analysis By Nicolas Gavoille; Anna Zasova
  2. Foreign Ownership and Labor Tax Evasion: Evidence from Latvia By Nicolas Gavoille; Anna Zasova
  3. Role of Individual Characteristics and Policies in Driving Labor Informality in Vietnam By Mr. Giovanni Ganelli; Anh Thi Ngoc Nguyen; Ms. Era Dabla-Norris
  4. Digital informalisation: rental housing, platforms, and the management of risk By Ferreri, Mara; Sanyal, Romola

  1. By: Nicolas Gavoille (Stockholm School of Economics in Riga (SSE Riga)and Baltic International Centre for Economic Policy Studies (BICEPS)); Anna Zasova (Baltic International Centre for Economic Policy Studies (BICEPS))
    Abstract: The labor markets of many transition countries are characterized by two features: a spike at the minimum wage in wage distribution and widespread use of so-called envelope wages, i.e., non-declared cash coming in addition to the official wage. In this paper, we present a body of suggestive evidence highlighting the prevalence of wage underreporting among minimum wage earners. We study two minimum wage hikes implemented in Latvia in 2014 and 2015, and show that (i) minimum wage employees are more likely to survive these minimum wage hikes than employees earning slightly more, and (ii) minimum wage employees are more likely to switch to part-time work within the same firm than their peers earning slightly more. These effects are present in the sample of small (more prone to tax evasion) firms and are not found in the sample of big (less prone to tax evasion) firms. In addition, we show that minimum wage earners switching from employment in a small to a big firm enjoy a significantly larger wage gain than employees earning slightly more. Taken together, these results are consistent with tax evaders being overrepresented among minimum wage earners and are hard to rationalize otherwise.
    Date: 2021–11
  2. By: Nicolas Gavoille (Stockholm School of Economics in Riga (SSE Riga)and Baltic International Centre for Economic Policy Studies (BICEPS)); Anna Zasova (Baltic International Centre for Economic Policy Studies (BICEPS))
    Abstract: This paper shows that in a context of widespread labor tax evasion, employees of foreign-owned firms receive less undeclared cash payments than employees of domestic firms. The empirical analysis relies on a combination of administrative and survey data and implements an expenditure-based underreporting analysis a la Pissarides and Weber (1989). This provides an alternative explanation for the wage premium for employees of foreign-owned firms observed in similar environments.
    Date: 2021–11
  3. By: Mr. Giovanni Ganelli; Anh Thi Ngoc Nguyen; Ms. Era Dabla-Norris
    Abstract: Using data from the Vietnam Labor Force Survey, this paper takes a granular look at the most salient drivers of labor informality in Vietnam by examining: (i) the nature of labor informality and transitions from formal to informal employment status and the role of worker characteristics; (ii) the empirical likelihood of being in informal employment and the policy determinants of informality using within-in country variation in the business climate and governance; and (iii) whether different policy reforms have a differential impact on workers. Our analysis sheds light on how individual characteristics and policy impediments contribute to high levels of informality and points to the need for a comprehensive agenda to tackle informality.
    Keywords: informality;Vietnam;Labor Force Survey;labor market segmentation;structural reforms;economic governance;PCI.;WP;wage worker;wage premium;FDI firm;wage employment;earnings gap;work experience
    Date: 2020–12–11
  4. By: Ferreri, Mara; Sanyal, Romola
    Abstract: The eruption of disruptive digital platforms is reshaping geographies of housing under the gaze of corporations and through the webs of algorithms. Engaging with interdisciplinary scholarship on informal housing across the Global North and South, we propose the term ‘digital informalisation’ to examine how digital platforms are engendering new and opaque ways of governing housing, presenting a theoretical and political blind spot. Focusing on rental housing, our paper unpacks the ways in which new forms of digital management of risk control access and filter populations. In contrast to progressive imaginaries of ‘smart’ technological mediation, practices of algorithmic redlining, biased tenant profiling and the management of risk in private tenancies and in housing welfare both introduce and extend discriminatory and exclusionary housing practices. The paper aims to contribute to research on informal housing in the Global North by examining digital mediation and its governance as key overlooked components of housing geographies beyond North and South dichotomies.
    Keywords: algorithm; Global North; digital platforms; housing informality
    JEL: R14 J01
    Date: 2021–12–05

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