nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2022‒01‒31
six papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Black Economy, Financial Inclusion, Financial Liberalization Nexus: A Panel Analysis of Developing Countries By Sulehri, Fiaz Ahmad; Ahmed, Usman; Alim, Wajid
  2. Does informal employment improve livelihood in the long-term in Azerbaijan? By Nahmadova, Firuza
  3. The Role of Income and Property Taxes in Tax Transition and the Mediating Effect of Financial Development By Kodjo Adandohoin; Jean-Francois Brun
  4. Finance and Growth of SMEs in South Asia: Evidence from Bangladesh, Pakistan, and Sri Lanka By Sharma, Palak
  5. A Framework for Financing Housing Development and Ownership in Africa By Jonathan Oladeji; Joseph Yacim; Benita Zulch
  6. El rompecabezas de la protección social en un mercado laboral con alta informalidad: análisis de un siglo de reformas en Colombia By Andrés Alvarez; Marta Juanita Villaveces

  1. By: Sulehri, Fiaz Ahmad; Ahmed, Usman; Alim, Wajid
    Abstract: This study has examined the impact of financial liberalization and financial inclusion on the black economy in the case of developing countries from 2004 to 2019. The black economy is selected as an explained variable, whereas financial inclusion, financial liberalization, tax collection, level of corruption and political instability are selected as explanatory variables. Panel unit root issue has been checked with the help of PP-Fisher Chi-square (PP-FC), ADF-Fisher Chi-square (ADF-FC), Im, Pesaran, and Shin W-stat (IPSW), and Levin, Lin & Chu t* (LLC) unit root tests. The fixed-effect model has been used for examining the dependence of the black economy on selected explanatory variables. Panel Granger causality test has been applied for checking the causal relationship among the selected variables. The results show that financial liberalization has a negative and insignificant impact on the black economy. Financial inclusions, the level of corruption, and political instability have a positive and significant impact on the black economy. Tax collection has a negative and significant impact on the black economy. The results of the causality test show that most of the variables have unidirectional causality between each other. Based on estimated results, the developing countries should control corruption, political instability, hence level of financial inclusion and tax collection for the reduction of the black economy
    Keywords: Financial Liberalization, Financial Inclusion, Black Economy
    JEL: G00 O15
    Date: 2021
  2. By: Nahmadova, Firuza
    Abstract: Much of the research on income inequality, and livelihood rely on government labor and wages statistics. In emerging economies, the lack of reliable data and the prevalence of informal employment is often mentioned as the main limitation to the credibility of these studies’ results. Azerbaijan is one such case where it is quasi-impossible to estimate an actual average income as informal employment is over half of the entire economy due to, among others, undeclared revenue, low-level bribery, and low formal income. This paper investigates whether informal employment and the undeclared (informal) income that citizens perceive from the related activities improve their livelihoods in the long-term. The relationship between income inequality and informal employment will be discussed based on a comparative analysis of three developing countries from three different regions, namely Africa, Central America, and South-East Asia. Evidence from these developing economies suggests that informal income does not positively impact their livelihoods. The paper ends with a discussion of the impact of informal employment in Azerbaijan using household income per capita statistics for 2020. The discussion suggests that the prevalence of informal employment does not improve the livelihood of the average household.
    Keywords: informal employment, Azerbaijan, poverty, income inequality, wages
    JEL: E2 E26
    Date: 2021–11
  3. By: Kodjo Adandohoin (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne); Jean-Francois Brun (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)
    Abstract: This paper investigates second wave tax transition (transfer of tax pressure from border taxation towards domestic taxation) concerns in developing countries. It essentially focuses on the compensation effects of incomes and property taxes over international trade tax revenue losses in developing countries. Using a generalized method of moment estimator, we come to the evidence that, incomes and property taxes are poor instruments to balance trade tax revenue losses of trade liberalization in these countries. However, a mediating effect of financial development in the compensation nexus driven by corporate income taxes was found. We explain this result by the fact that the use of financial sector generates paper trails to government in order to enforce and raise corporate income taxes. Financial development may progressively crowd-out informal sector and leads to business formalization. Surprising, we do not find any mediating effect of financial development in the compensation patterns with personal income taxes. Nevertheless, some heterogeneities were discovered. Financial development mediates the compensation patterns of personal income taxes in Latin American countries, while the effect holds on corporate income taxes in African countries. We conclude the paper by highlighting the important role of financial development in second generation tax transition concerns over developing countries.
    Keywords: Income Taxes,Property Tax,Tax Transition,Developing Countries
    Date: 2021
  4. By: Sharma, Palak (Monash University)
    Abstract: This paper studies the determinants of access to finance in small and medium enterprises (SMEs) in three South Asian economies, Bangladesh, Pakistan, and Sri Lanka. The data for this study is from the World Enterprise Survey data set for each country collected by the World bank. The paper uses logistic regression for empirical analysis. Findings of this paper confirm that access to formal and informal finance is significantly determined by the size, age, and formalization of firms. The gender of the owner-manager, sales performance, location, and legal status of the firm are insignificant predictors of a firm’s ability to raise finance. Results from this paper can help governments shape policy and develop programs that can augment a firm’s ability to raise financing from formal sources.
    Keywords: Economic growth ; informal finance ; SMEs ; World Enterprise survey JEL Classification: O11; O53
    Date: 2021
  5. By: Jonathan Oladeji; Joseph Yacim; Benita Zulch
    Abstract: Purpose: There is a need for the modification of mortgage finance to embrace new innovative finance options that will facilitate access to housing by low- and middle-income earners in Africa. Thus, this paper seeks to evaluate the suitability of informal finance options for incremental housing development in Africa.Design / methods followed/ approach: A desktop survey of the literature was carried out to consider mortgage financing in contrast to other housing financing options. The approach was used to critically appraise and consolidate existing studies on innovative financing (informal finance option) in Africa. The Mendeley app was used to collate and organize the literature chronologically spanning 24 years of 1994-2018. Thematic content analysis was used to appraise positions, gaps, and lapses in the implementation of different informal housing financing solutions.Findings: In most African countries like Kenya, Rwanda, Nigeria, and Malawi, mortgage finance research continues to grow as a major part of affordable housing finance. However, there are considerable interests in innovative affordable housing finance tools and incremental housing for the low-income groups.Research limitations / implications: This study is limited by the low volume of quantitative literature and data gaps about incremental housing in the African context. However, this motivates the need for a more elaborate exploration of the research and knowledge available.Practical implications: This study adds to the growing discussion of exploring available research on innovative housing finance in Africa.Originality / Value of work: To our knowledge, this study provides insight into the opportunities for a diverse pool of formal and informal financing options to build an acceptable house finance framework for the African housing market.
    Keywords: Affordability; Africa; developing; economies; Finance; Framework; housing; Incremental; loans; Mortgage
    JEL: R3
    Date: 2021–09–01
  6. By: Andrés Alvarez; Marta Juanita Villaveces
    Abstract: ¿Qué podemos aprender de la evolución del sistema de seguridad social y de las instituciones del mercado laboral para los futuros procesos de reforma en Colombia? Contestamos este interrogante desde una perspectiva histórica y de análisis institucional la evolución de las reglas y las instituciones que han definido la protección social y las reglas del juego que definen el mercado laboral colombiano, desde inicios del siglo XX hasta 2019. El análisis es a través de un enfoque institucionalista tomando tres conceptos claves. Primero, la dependencia del sendero que ha marcado la rigidez y las dificultades para implementar cambios verdaderamente estructurales en el sistema y que han llevado al país a insistir muchas veces en perspectivas de ajustes menores y desarticulados, en cambio de adoptar un cambio importante de enfoque. Segundo, una mirada integral a los diferentes componentes del sistema, de manera que nos permite mostrar cómo interactúan algunos elementos que muchas veces se consideran independientes. Tercero, inconsistencia dinámica de las reformas que conduce a permanentes reformas que generan cambios comportamentales en los agentes en algunos casos contrarios a los objetivos de las mismas, obligando a sucesivos ajustes parciales sin una solución integral de los problemas.
    Keywords: seguridad social, mercado laboral, salario mínimo, informalidad, pensiones, costos laborales, seguro de desempleo.
    JEL: N36 J46 E02 H55 J58 J65
    Date: 2021–12–16

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