nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2022‒04‒18
ten papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Fostering social businesses and formalising the informal economy in MENA countries By Philippe Adair; Vladimir Hlasny; Mariem Omrani; Kareem Sharabi Rosshandler
  2. The welfare effects of unemployment insurance in Argentina. New estimates using changes in the schedule of transfers By Martin González-Rozada; Hernan Ruffo
  3. Labour transitions that lead to platform work: Towards increased formality? Evidence from Argentina By Sonia FILIPETTO; Ariela MICHA; Francisca PEREYRA; Cecilia POGGI; Martín TROMBETTA
  4. Precarisation or Protection? The Impact of Digital Platform Labour on Argentinean Domestic Workers in Times of Pandemic By Francisca PEREYRA; Lorena POBLETE; Cecilia POGGI; Ania TIZZIANI
  5. Digitalization and Tax Compliance Spillovers: Evidence from a VAT e-Invoicing Reform in Peru By Mr. Matthieu Bellon; Salma Khalid; Jillie Chang; Pilar Villena; Juan Carlos Paliza; Ms. Era Dabla-Norris
  6. Mist Over a Meadow: Tax Designation Effects on Compliance By Lubomir Cingl; Tomas Lichard; Tomas Miklanek
  7. The Determinants of Tax Morale in India. By Korgaonkar, Chinmay N
  8. Are SMEs Avoiding Compliance Costs? Evidence from VAT Reforms in Japan By Takafumi Suzuki; Takafumi Kawakubo
  9. Under-Reporting of Firm Size Around Size-Dependent Regulation Thresholds: Evidence from France By Philippe Askenazy; Thomas Breda; Vladimir Pecheu
  10. Exposure or Income? The Unequal Effects of Pollution on Daily Labor Supply By Bridget Hoffmann; Juan Pablo Rud

  1. By: Philippe Adair; Vladimir Hlasny; Mariem Omrani; Kareem Sharabi Rosshandler
    Date: 2022
  2. By: Martin González-Rozada; Hernan Ruffo
    Abstract: Unemployment insurance transfers should balance the provision of consumption to the unemployed with the disincentive effects on the search behavior. Developing countries face the additional challenge of informality. Workers can choose to hide their employment state and labor income in informal jobs, an additional form of moral hazard. To provide evidence about the effects of this policy in a country affected by informality we exploit kinks in the schedule of transfers in Argentina. Our results suggest that higher benefits induce moderate behavioral responses in job-finding rates and increase re-employment wages. We use a sufficient statistics formula from a model with random wage offers and we calibrate it with our estimates. We show that welfare could rise substantially if benefits were increased in Argentina. Importantly, our conclusion is relevant for the median eligible worker that is strongly affected by informality.
    Keywords: Unemployment Insurance, Sufficient statistics, Regression kink design, Instrumental Variables.
    JEL: C41 I38 J65
    Date: 2022–02
  3. By: Sonia FILIPETTO; Ariela MICHA; Francisca PEREYRA; Cecilia POGGI; Martín TROMBETTA
    Abstract: The recent growth of the platform economy as a tool for labour exchanges has brought about concerns on the overall quality of jobs created. As labour platforms leave a digital trace, this paper assesses whether platforms can help to increase registered labour in contexts of extended informality as the one for Argentina, asking what does formalization via registration - if any - actually imply for workers and how do they perceive it. The article inspects three on-demand occupations in the Buenos Aires Metropolitan Area: private passengers’ transportation (Uber), domestic work (Zolvers) and home repair services (Home Solution). The main results show that platforms “formalization effect” is dependent on several factors: a platform’s business model, or the company’s interest and need to promote or encourage such process; the pre-existing occupational dynamics in terms of formalization; and general labour market conditions. In the context of an Argentine labour market harmed by a prolongued recession, most transitions to formality via the platform occur to previously unemployed workers who join them.
    Keywords: Argentine
    JEL: Q
    Date: 2022–02–25
  4. By: Francisca PEREYRA; Lorena POBLETE; Cecilia POGGI; Ania TIZZIANI
    Abstract: The article analyses how the platform economy affects the domestic service sector, focusing particularly on the issue of workers’ formalisation. It looks at Zolvers, the only digital platform for domestic workers in Argentina, and uses a mixed method approach to inspect workers’ relationship between jobs in and out of the platform. The article argues that the association between domestic service and the platform economy should be analysed in context: the uberisation of the activity is not a linear and uniform trend, but rather a contextual one. In fact, compared to off-platform jobs in the sector, the paper finds significantly higher levels of registration among Zolvers workers. This is particularly relvant since Zolvers’ jobs are characterized by few weekly hours, a kind of insertion that has proved most resistant to formalisation policies in the sector. The paper delves into the reasons behind these phenomenon, paying particular attention to the way in which workers experience their labour conditions. In the context of the Covid-19 crisis, the article also shows that registration, although having a protective effect, does not counteract the vulnerability implied by short-hours job positions, whose termination is substantially cheaper than full-time work.
    Keywords: Argentine
    JEL: Q
    Date: 2022–03–07
  5. By: Mr. Matthieu Bellon; Salma Khalid; Jillie Chang; Pilar Villena; Juan Carlos Paliza; Ms. Era Dabla-Norris
    Abstract: Our study uses administrative data on firm-to-firm transactions and quasi- experimental variation in the rollout of electronic invoicing reforms in Peru to study the diffusion of e-invoicing through firm networks and its effect on tax compliance. We find that voluntary e-invoicing adoption is higher amongst firms with partners who are mandated to adopt e-invoicing, implying positive technology adoption spillovers. Spillovers are stronger from downstream partners and from export-oriented firms. Firms are less likely to continue transacting with a partner who has been mandated into e-invoicing, with the effect only partially reversed if both firms adopt e-invoicing, suggesting that network segmentation may occur. Smaller firms who transact with partners mandated into e-invoicing report 11 percent more sales and pay 17 more VAT in the year that their partner is mandated to adopt e-invoicing, suggesting positive spillovers in tax compliance behavior for this subset of firms.
    Keywords: VAT, tax compliance, technology spillovers, firm transaction data
    Date: 2022–03–18
  6. By: Lubomir Cingl; Tomas Lichard; Tomas Miklanek
    Abstract: Tax designation has been a popular attribute of the tax plans in a rising number of countries, yet evidence of its effects on tax compliance remains scarce. We conduct an online experiment with 830 Czech taxpayers who are self-employed or regular employees. Our approach mimics the actual tax designation mechanism: it allows subjects to express their preferences for how a part of their taxes is used by redirecting some of the money to a non-governmental organization (NGO). We exogenously vary the presence of the tax designation mechanism, the possibility to choose the recipient NGO from a list, the tax rate, and the use of tax revenues. We find no consistent significant effects of the tax designation mechanism on overall compliance, though for employees, we do find a small effect on the probability of them being fully compliant. This result complements previous findings of experiments with students, who, like employees, also do not personally file their tax returns. Our results imply that the tax designation mechanism does not encourage higher compliance among taxpayers with the greatest opportunities for tax evasion.
    Keywords: tax-enforcement; tax compliance; online tax experiment; tax designation;
    JEL: C91 C93 D02
    Date: 2022–03
  7. By: Korgaonkar, Chinmay N (Indian Revenue Service (Income Tax))
    Abstract: This is a study of tax morale in India. The concept of tax morale or the citizens' attitude towards tax compliance is vital for the design and implementation of fiscal policy. Tax morale can foster voluntary compliance and hence support the enforcement and deterrence-driven approaches of the tax agencies. However, limited literature regarding the tax morale of Indian citizens is available. The present paper tries to bridge the gap by analyzing the available data for India from the 5 waves of the World Values Survey (1990-2014). Treating tax morale as a dependent variable, this study estimates the factors influencing it. We show that the trust in government, parliament, and civil services positively affects the tax morale of Indian citizens. The correlation between trust in the legal system and tax morale was also positive but not significant. Among the socio-economic variables, education improves the intrinsic motivation of individuals towards tax compliance. Interestingly, the full-time/salaried persons have lower tax morale as compared to the self-employed employees. This finding has important policy implications, given that the full-time/salaried class contributes a significant share of the total taxes paid by the individual taxpayers in India.
    Keywords: Tax Morale ; Tax Compliance ; India ; Fiscal Policy ; Self-employed ; Salaried
    Date: 2022–04
  8. By: Takafumi Suzuki; Takafumi Kawakubo
    Abstract: This study disentangles the motives behind enterprises' responses to size-dependent tax regulations by exploiting value-added tax (VAT) reforms in Japan. Tax threshold and tax rate in Japan have changed over the past three decades since the introduction of VAT. We build on the model of Harju et al. (2019) to incorporate various tax reforms and conducted bunching estimation. By using a novel panel of Japanese Census of Manufacture covering the periods of VAT introduction and reforms, we find from the local estimates that the observed output response by enterprises is mainly caused by compliance costs rather than tax rates for small enterprises in Japan. The results suggest that the authorities are encouraged to ease compliance costs while enhancing tax revenue to improve the efficiency of tax design.
    Date: 2022–03
  9. By: Philippe Askenazy (CMH - Centre Maurice Halbwachs - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique); Thomas Breda (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Vladimir Pecheu (AMU - Aix Marseille Université)
    Abstract: The existence of a peak at 49 employees in the firm size distribution in France, followed by a permanent decrease in the number of firms has been the starting point of political discourses and academic studies on the cost of size-dependent regulations at 50-employee. These features of the distribution are visible when firm size is declared by employers in fiscal data but not when it is reconstructed from individual-level social security data. This working paper explores these differences both from statistical and institutional viewpoints. It provides evidence showing that a large proportion of employers manipulate the firm size they declare in their fiscal documents. This manipulation generates the particular shape of the size distribution in the fiscal data. We discuss the rationale for such behavior: the key point is that the under-declaration in fiscal data is not subject to substantial sanctions and it can allow firms not to comply with the labor law. Event studies and comparisons of firms below and above the 50-employee threshold suggest that this threshold may only have limited effects on firm performance or growth potential. Consequently the welfare costs of the regulations at 50-employee might be smaller than what was found by some of the studies that assume a perfect compliance with the law.
    Keywords: Regulations,Firm size,Firm dynamics,Economic cost,Noncompliance Regulations,Non-compliance
    Date: 2022–03
  10. By: Bridget Hoffmann (Inter-American Development Bank); Juan Pablo Rud ((Royal Holloway, University of London/IFS)
    Abstract: We use high-frequency data on fine particulate matter air pollution (PM 2.5) at the locality level to study the effects of high pollution on labor supply decisions and hospitalizations for respiratory disease in the metropolitan area of Mexico City. We document a negative, non-linear relationship between PM 2.5 and same-day labor supply, with strong effects on days with extremely high pollution levels. On these days, the average worker experiences a reduction of around 7.5% of working hours. Workers partially compensate for lost hours by increasing their labor supply on days that follow high-pollution days. Informal workers reduce their labor supply less than formal workers on high-pollution days and also compensate less on the following days. This suggests that informal workers may experience greater exposure to high pollution and greater reductions in labor supply and income. We provide evidence that reductions in labor supply due to high pollution are consistent with avoidance behavior and that income constraints may play an important role in workers’ labor supply decisions.
    Date: 2022–01

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