nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2022‒01‒24
eight papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Growing apart or moving together? Synchronization of informal and formal economy cycles By Ceyhun Elgin; M. Ayhan Kose; Franziska Ohnsorge; Shu Yu
  2. Understanding informality By Ceyhun Elgin; M. Ayhan Kose; Franziska Ohnsorge; Shu Yu
  3. Social Assistance for Informal workers By Katharina LOBO,; Nida KRASNIQI,; Ana Paulina BERNAL,; Daniel CAMACHO,; Cecilia POGGI.
  4. Informal Labor Markets in Times of Pandemic: Evidence for Latin America and Policy Options By Gustavo Leyva; Carlos Urrutia
  5. Shadow economy and regional development - an argument in favor of fiscal decentralization By Petranov, Stefan
  6. No taxation without property rights: Formalization of property rights on land and tax revenues from individuals in sub-Saharan Africa By Marina Nistotskaya; Michelle D'Arcy
  7. Tax Reform and Tax Compliance Behaviour of Companies in Nigeria By Okeke, Clement Ejiofor; Saluadeen, Yinka Mashood
  8. Estudio Exploratorio sobre la Informalidad en las Jurisdicciones Provinciales By Valeria J. Blanco; A. Daniela Cristina; Iván Iturralde; Alberto J. Figueras

  1. By: Ceyhun Elgin; M. Ayhan Kose; Franziska Ohnsorge; Shu Yu
    Abstract: We study the degree of synchronization between formal- and informal-economy business cycles. Using a comprehensive database of informal activity that covers a wide range of informality measures from almost 160 countries over the 1990-2018 period, we report two major results. First, fluctuations in informal-sector output are strongly positively correlated with those in formal-sector output. In contrast, fluctuations in informal employment are largely uncorrelated with those in formal-sector output. Second, movements in the formal economy tend to spillover to the informal economy. Using a novel set of instrumental variables, we show that fluctuations in formal-sector output “cause” movements in informal-sector output.
    Keywords: Informal economy, self-employment, business cycle
    JEL: E26 E32 J46 O17
    Date: 2021–09
  2. By: Ceyhun Elgin; M. Ayhan Kose; Franziska Ohnsorge; Shu Yu
    Abstract: This paper introduces a comprehensive database of informal economic activity. The database focuses on measures that have strong cross-country and over time coverage: it includes both model-based and survey-based measures of informality and covers more than 160 economies for the period 1990-2018. The paper illustrates two applications of the database. First, it distills stylized facts of informal activity, including its declining trend and pervasiveness in emerging market and developing economies (EMDEs). Second, it documents the cyclical features of the informal economy. Overall, informal economy recessions (recoveries) do not differ significantly from those of formal economy. Like formal-economy business cycles, informal-economy business cycles tend to be shallower in advanced economies than in EMDEs. Informal employment in both advanced economies and EMDEs appears to be largely acyclical.
    Keywords: Informal economy, self-employment, employment, output, business cycles
    JEL: E26 E32 J46 O17
    Date: 2021–09
  3. By: Katharina LOBO,; Nida KRASNIQI,; Ana Paulina BERNAL,; Daniel CAMACHO,; Cecilia POGGI.
    Abstract: This paper exposes the measures extended to informal workers during the COVID-19 pandemic. The study analyzes two South-American countries which have a high percentage of informality, Colombia and Brazil. We study the implications of the expansion of the social assistance programs of these two countries, exposing their weakness and strengths to mitigate the pandemic adverse effects. The evidence provided by this research makes us believe that the perseverance of the informal worker's inclusion in cash transfers programs can be a powerful tool to mitigate inequalities in the labor market.
    Keywords: Brésil, Colombie
    JEL: Q
    Date: 2022–01–04
  4. By: Gustavo Leyva; Carlos Urrutia
    Abstract: We document the evolution of labor markets of five Latin American countries during the COVID-19 pandemic, with emphasis on informal employment. We show, for most countries, a slump in aggregate employment, mirrored by a fall in labor participation, and a decline in the informality rate. The latter is unprecedented since informality used to cushion the decline in overall employment in previous recessions. Using a business cycle model with a rich labor market structure, we recover the shocks that rationalize the pandemic recession, showing that labor supply shocks and productivity shocks to the informal sector are essential to account for the employment and output loss and for the decline in the informality rate.
    JEL: E24 E32 F44 J65
    Date: 2021–12
  5. By: Petranov, Stefan
    Abstract: The article discusses the regional aspects of the shadow economy in Bulgaria. The main factors that generate motivation for shadow practices are considered and it is concluded that they operate mainly at the national level. It follows that measures to limit and prevent this phenomenon should be primarily national. However, the article argues that regional policies can also be used in this regard. A moderate fiscal decentralization can help to increase the tax morality which is one of the most slowly changing and most intractable factors generating motivation for the implementation of shadow practices. It is also argued that fiscal decentralization in Bulgaria has the potential to improve other aspects of the economic system.
    Keywords: shadow economy, regional development, regional policies, fiscal decentralization, Bulgaria
    JEL: E26 H7 H71 R1
    Date: 2021–06–01
  6. By: Marina Nistotskaya; Michelle D'Arcy
    Abstract: The arguments that property rights and taxation positively affect development are well established in separate literatures, but the link between property rights and taxation is under-studied. To address this gap, we theorize that formalization of individual property rights facilitates economic exchange at scale, providing a viable opportunity for individuals to improve their economic standing, in exchange for which property owners assent to pay taxes. We illustrate the argument by comparing the historical evolution of tax states in early modern Europe and colonial Africa.
    Keywords: Property rights, Taxation, Sub-Saharan Africa, Afrobarometer
    Date: 2021
  7. By: Okeke, Clement Ejiofor; Saluadeen, Yinka Mashood
    Abstract: This paper evaluates the 2007 Company Income Tax (CIT) Reform with respect to improving the tax compliance behaviour of companies in Nigeria. Data for total annual company income tax paid and the total GDP for the respective years of the study were extracted from National Bureau of Statistics records. The study covers a period of twenty years (ten years, 1997-2006 before and ten years, 2008-2017 after the reform). The Wilcoxon Rank Sum Test was used as analysis tool. The study finds companies to be more complaint after the reform than before. The study recommends further reforms in terms of increase in the level of incentives to companies to enhance tax compliance.
    Keywords: Compliance Behaviour, Tax Reform, Political Support, Fiscal Contract Enforcement
    JEL: G38 H3 K34
    Date: 2021–10–22
  8. By: Valeria J. Blanco (IEF de la FCE-UNC); A. Daniela Cristina (IEF de la FCE-UNC); Iván Iturralde (IEF de la FCE-UNC); Alberto J. Figueras (IEF de la FCE-UNC)
    Abstract: Regional differences in Argentina are very important. In this paper a macroeconomic approach is followed in order to analyze the main determinants of labor informality in the regional labor markets of Argentina. From a theoretical viewpoint, one may find two main perspectives: (a) a structuralist one; and (b) an institutionalist view. GMM estimations highlight the importance of both approaches, finding evidence that Active/Inactive ratio, proportion of small firms, the number of public employees per 1000 habitants and more qualified labour force exert a negative influence on the regional informality rate, whereas unemployment rate has a direct relationship with informality.
    Keywords: Informality, labour, structuralist, institutionalist, Argentina.
    JEL: J01 J2 O17
    Date: 2021–12

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