nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2022‒04‒25
eighteen papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Tax policies, informality, and real wage rigidities By Salazar, M.
  2. Temporary employment, informality, poverty and inequality By Tapias, J.
  3. Mobility and productivity in a dual labor market: an experiment By Mantilla, Cesar; Rincón, Ferley
  4. Firms and informality a new data base for Colombia By Fernandez, C.
  5. ‘When a Stranger Shall Sojourn with Thee': The Impact of the Venezuelan Exodus on Colombian Labor Markets By Santamaria, J.
  6. The trade-off between liquidity and insurance: voucher payments in a lab-in-the-field experiment with Colombian rural workers By Cano, Alexander; Cortes, Darwin; Mantilla, Cesar; Prada-Medina, Laura; Restrepo, Medardo
  7. Estimating the Employment and GDP Multiplier of Emergency Cash Transfers in Brazil By Ms. Joana Pereira; Mr. Frederik G Toscani; Roberto A. Perrelli; Daniel Cunha
  8. Transformation of Street Vending in Islamabad & Lessons for Urban Pakistan By Anum Shoaib Abbasi
  9. What motivates people to pay their taxes? Evidence from four experiments on tax compliance By Eric Floyd; Michael Hallsworth; John List; Robert Metcalfe; Kristian Rotaru; Ivo Vlaev
  10. Voluntary Disclosure Programs — Design, Principles, and Implementation Considerations By Ms. Dora Benedek; Mr. Christophe J Waerzeggers; Martin Grote; Maksym Markevych; Grace Jackson; Ms. Lydia E Sofrona
  11. Where Do My Tax Dollars Go? Tax Morale Effects of Perceived Government Spending By Matias Giaccobasso; Brad C. Nathan; Ricardo Perez-Truglia; Alejandro Zentner
  12. Countering global oil theft: responses and solutions By Etienne Romsom
  13. Taxation, health system endowment and quality of institutions: a "social" perception across Europe By Cafferata, Alessia; Cerruti, Gianluca; Mazzone, Giulio
  14. An Algorithmic Introduction to Savings Circles By Rediet Abebe; Adam Eck; Christian Ikeokwu; Samuel Taggart
  15. Revisión de la modelación macroeconómica de la informalidad By Castrillón, C.; Gómez, W; Montoya, J.
  16. Persistencia de la pobreza e informalidad laboral en Colombia: un estudio para hogares de ingresos bajos y medios By Acosta, E.
  17. El subempleo en Colombia y sus desagregaciones: principales características socioeconómicas asociadas al trabajo de baja calidad By Lodoño, D.; Cortés, D.
  18. Análisis de la transmisión de la tasa de interés de política monetaria en la tasa de interés de microcréditos en Colombia: discusiones de independencia By Batz, A.; Montes, J.; Romero, J.; Rubio, P.

  1. By: Salazar, M.
    Abstract: Developing countries have a vast informal sector generally associated with low levels of productivity. The persistence of informality could be a response to rigidities in the labor market, associated with a combination of high non-wages cost and high minimum wages. This paper proposes a theoretical framework to understand the tax policies’ role that discourages informality, such as lower payroll taxes in the formal sector or increases enforcement expenditure in an economy with real wage rigidities. I develop a search and matching model with a shirking mechanism with formal and informal workers. The simulations results suggest that the magnitud effect of tax polcies depends on real wage rigidities. In relative terms, when the economy has high real wage rigidities, the reduction of payroll taxes has a greater effect reducing the informality. In contrast, when the economy has low real wage rigidities, the enforcement expenditure has a significant effect to reduce the informality. Also, the results show the existence of tax polcies combition that reduce the informal labor in an effective way
    Keywords: Informality; Tax policies; Enforcement expenditure; Fiscal policies; Searchand matching; Efficiency wage; Shirking mechanism
    JEL: J46 E26 E62 O17 H26
    Date: 2021–12–02
  2. By: Tapias, J.
    Abstract: An essential tool in the fight against poverty is the generation of decent jobs through an equitable and inclusive labor market. To achieve this, two fronts of struggle must be addressed. The first is informality, which causes many workers in developing countries to have precarious working conditions and low incomes. The second refers to the misuse of temporary contracts. Temporary jobs are associated with instability and wage penalties. Therefore, a policy aimed at obtaining decent jobs to overcome poverty must include these two battlefronts. In this sense, a Computable General Equilibrium (CGE) model with temporary, permanent, and informal work is developing. We show some interesting relationships through the equations formulated so far. The future results of this work will be helpful to address and generate policies aimed at achieving decent jobs.
    Keywords: Labor informality; temporary employment; poverty;inequality; macroeconomics.
    JEL: E24 E26 I3 D63
    Date: 2021–12–03
  3. By: Mantilla, Cesar; Rincón, Ferley (Universidad del Rosario)
    Abstract: We propose an experiment where participants receive one of two contracts involving a piece-rate payment for performing a real-effort task. The differences in piece-rate levels aim to capture earnings differentials between formal and informal markets to study how the reallocation rules of these contracts, capturing labor mobility, affect the workers’ effort supply. We use a tournament structure where the worst-performer of the best contract and the top-performer of the worst contract enter into a contest, whose outcome is defined by the completed transcriptions in a real-effort task. We find that these contests, regardless of a low or high mobility rule based on effort, increase the participants' productivity. We also find that low mobility rules have a larger effect on a sample of workers when combined with a meritocratic initial allocation of the contracts. By contrast, students react more to rules evoking high labor mobility. We also find that the most significant increase in productivity comes from participants who retain the best contract after the contest, suggesting that perceptions of downward mobility are dominant in altering effort supply.
    Date: 2022–03–16
  4. By: Fernandez, C.
    Abstract: The article Firms & Informality identifies the main stylized facts of business informality in Colombia. To identify these facts, an innovative database (EEG) was built by attaching information from the Micro-business Survey (EMICRON), the structural surveys of manufacturing, trade, and services (EAM, EAC and EAS) and the questions asked to the employer by the household survey. Additionally, some missing information was completed by using the GEIH questions addressed to the workers. According to the exercise the main features that a model of informality in Colombia should consider are the following: 1. The share of microbusiness and self-employment is high. 2. Although informality is decreasing in firm´s size it might not be assumed as restricted to microbusiness. 3. The intensive and extensive margin of informality should be included independently, because they do not always move in the same pace/direction 4. Both worker´s and firm´s heterogeneity should be considered since the reasons to be informal vary among informality types, but informality might also cause further heterogeneity. The heterogeneity variable should be observable to allow the implementation of policy recommendations. 5. Some institutional features that can be contemplated in a model are: the large, exempted tax brackets, the profit taxes formal labor cost deduction, and the limited scope of the single tax scheme that causes a rather continuous than binary variable of informality in the country.
    Keywords: Informality, Firm informality; Informal labor market; Taxonomy of informality;Policy recommendations for informality; Size distribution of firms
    JEL: J46 O17 L11 O47
    Date: 2021–11–11
  5. By: Santamaria, J.
    Abstract: This paper analyzes the effect of open-door immigration policies on local labor markets. Using the sharp and unprecedented surge of Venezuelan refugees into Colombia, I study the impact on wages and employment in a context where work permits were granted at scale. To identify which labor markets immigrants are entering, I overcome limitations in offcial records and generate novel evidence of refugee settlement patterns by tracking the geographical distribution of Internet search terms that Venezuelans but not Colombians use. While offcial records suggest migrants are concentrated in a few cities, the Internet search index shows migrants are located across the country. Using this index, high-frequency labor market data, and a difference-in-differences design, I find precise null effects on employment and wages in the formal and informal sectors. A machine learning approach that compares counterfactual cities with locations most impacted by immigration yields similar results. All in all, the results suggest that open-door policies do not harm labor markets in the host community.
    Keywords: Migration; Employment; Wages; Google searches
    JEL: J61 J68 C81
    Date: 2022–02–07
  6. By: Cano, Alexander; Cortes, Darwin; Mantilla, Cesar; Prada-Medina, Laura; Restrepo, Medardo
    Abstract: We conduct a lab-in-the-field experiment in which 214 rural workers must choose between a cash or a voucher payment for completing a real-effort task. Participants face a twenty-percent chance of suffering a negative shock that will reduce their cash payment by roughly two-thirds. Opting for the voucher reduces the likelihood of the shock by one-half. We employ a multiple-price list with a varying voucher payment and a fixed cash payment to study this trade-off relevant for expanding the coverage and contributions of rural labor formalization. We find that take-up rates go from 32\% to 56\%, from the least to the more generous voucher. In a reference sample of undergrad students from the same region, take-up rates went from 17\% to 33\%. Voucher redemption costs are exogenously manipulated by randomly assigning the show-up fee in cash or vouchers. Lower redemption costs induce a higher voucher take-up, but only among students. Being a rural worker with land, and receiving government subsidies in cash, predict a higher voucher take-up.
    Date: 2022–03–07
  7. By: Ms. Joana Pereira; Mr. Frederik G Toscani; Roberto A. Perrelli; Daniel Cunha
    Abstract: We estimate the subnational employment and GDP multiplier of Brazil's 2020 federal cash transfers to vulnerable households. Using two-stage least squares regressions we estimate a formal employment multiplier and then apply an analytical transformation to recover an implied GDP multiplier in the range of 0.5-1.5. The lower bound of this range lies below most estimates in the literature, which may result from the exceptional constraints imposed by the pandemic on supply chains and consumption. Nevertheless, even using the lower end of our range implies that federal cash transfers played an important role in supporting employment and GDP.
    Keywords: Fiscal multipliers, Household cash transfers, Labor informality
    Date: 2022–03–18
  8. By: Anum Shoaib Abbasi (Pakistan Institute of Development Economics)
    Abstract: One-day Conference Economists and politicians have always been interested in urban development. Urban development means a way forward for economic development. Everyone has an equal chance to work in the economic world. One of the options that metropolitan areas provide to locals is street vending, sometimes known as the street economy. Recently Pakistan Institute of Development Economics (PIDE) and Metropolitan Corporation Islamabad (MCI) jointly organized a conference on the ongoing street vendors’ initiative in Islamabad under the ambit of the Ehsaas Rehribaan program. The Conference highlighted the significance of street vending, its condition inside Pakistan, and the solution over which the initiative has been started by the Ehsaas Program under ‘Ehsaas Rehribaan program’ with the collaboration of PIDE, MCI, and some private entities. The below-listed speaker shed light on the initiative of the Ehsaas Rehribaan program. Sania Nishtar, Special Assistant to Prime Minister on Poverty Alleviation Zia Banday, Focal person of the Ehsaas Rehribaan program Nadeem-ul-Haque, Vice-Chancellor, PIDE Hamza Shafqat, Deputy Commissioner, Islamabad
    Keywords: Street Vending, Transformation, Urban Pakistan
    Date: 2022
  9. By: Eric Floyd; Michael Hallsworth; John List; Robert Metcalfe; Kristian Rotaru; Ivo Vlaev
    Abstract: In this study, we first present a large natural field experiment that tested messages aimed at increasing tax compliance. We find that the main drivers of changes in compliance are messages describing the monitoring and enforcement behavior of the tax collector. A second natural field experiment built on the results of the first experiment to further investigate what kinds of costs resulting from tax collector oversight are salient to taxpayers. Specific time and cognitive incentives did not significantly increase payment rates, whereas stating non-specific costs of inaction did. Additional analyses suggest the increase in compliance is likely due to a 'fill in the blank' effect in which taxpayers assume the consequence is a fine. Interestingly, specifically stating maximum fine or jailtime consequences have the largest effect in a laboratory setting but only if the consequences are interpreted as realistic. Overall, our study reinforces that tax authorities can use short messages to increase tax compliance; the estimated accelerated revenue from the two field studies amounts to 9.9m GBP.
    Date: 2022
  10. By: Ms. Dora Benedek; Mr. Christophe J Waerzeggers; Martin Grote; Maksym Markevych; Grace Jackson; Ms. Lydia E Sofrona
    Abstract: This note explores the conditions, design elements, and implementation considerations of a successful voluntary disclosure program (VDP), including its compliance with anti–money laundering/combating the financing of terrorism (AML/CFT) international standards. The note emphasizes that such a program must be offered in the context of a considerably strengthened and credible enforcement capacity—one that is explicitly publicized to taxpayers—to avoid undermining tax morale.
    Keywords: Tax Evasion, Tax Policy Design, Tax Revenues, Illegal Behavior, anti–money laundering, combating the financing of terrorism, AML/CFT
    Date: 2022–04–06
  11. By: Matias Giaccobasso; Brad C. Nathan; Ricardo Perez-Truglia; Alejandro Zentner
    Abstract: Do perceptions about how the government spends tax dollars affect the willingness to pay taxes? We designed a field experiment to test this hypothesis in a natural, high-stakes context and via revealed preferences. We measure perceptions about the share of property tax revenues that fund public schools and the share of property taxes that are redistributed to disadvantaged districts. We find that even though information on where tax dollars go is publicly available and easily accessible, taxpayers still have significant misperceptions. We use an information-provision experiment to induce exogenous shocks to these perceptions. Using administrative data on tax appeals, we measure the causal effect of perceived government spending on the willingness to pay taxes. We find that some perceptions about government spending have a significant effect on the probability of filing a tax appeal and in a manner that is consistent with the classical theory of benefit-based taxation. We discuss implications for researchers and policy makers.
    JEL: C93 H26 I22 Z13
    Date: 2022–02
  12. By: Etienne Romsom
    Abstract: This second of two papers on global oil theft discusses ways to reduce oil theft, misappropriation, and fraud. At US$133 billion per year, oil is the largest stolen natural resource globally, while fuel is the most smuggled natural resource. Oil theft equates to 5-7 per cent of the global market for crude oil and petroleum fuels. It is so engrained in the energy supply chain that thefts are priced in by traders and tolerated by many shipping companies as petty theft.
    Keywords: Oil, Fuel, Corruption, Crime, Tax evasion, Tax avoidance
    Date: 2022
  13. By: Cafferata, Alessia; Cerruti, Gianluca; Mazzone, Giulio
    Abstract: In this paper we analyze how the health system endowment and the quality of the institutions impact on a change of perception towards taxation. We conduct a sentiment analysis on French, Germans, Italians and Spanish users' tweets to understand if the impact of the current health emergency has modified the tax compliance of the citizens of the four biggest European Countries. We use a difference-in-differences estimation strategy, by comparing the average sentiment of individual tweets regarding taxation in different European NUTS-2 regions, before and after the spread of the Covid-19 pandemic. Our results highlight that in regions characterized by higher levels of health expenditure, people become more prone towards taxation with respect to the period before the widespread of covid-19. In addition, we show how a higher quality of institutions lead to a more positive perception of the same in relative and absolute terms and therefore a greater predisposition for a more progressive tax system.
    Keywords: Taxation; Sentiment Analysis; Tax compliance; Health System Endowment; Quality of institutions; Covid-19 crisis.
    JEL: C81 D04 H26 H51
    Date: 2022–02–28
  14. By: Rediet Abebe; Adam Eck; Christian Ikeokwu; Samuel Taggart
    Abstract: Rotating savings and credit associations (roscas) are informal financial organizations common in settings where communities have reduced access to formal financial institutions. In a rosca, a fixed group of participants regularly contribute sums of money to a pot. This pot is then allocated periodically using lottery, aftermarket, or auction mechanisms. Roscas are empirically well-studied in economics. They are, however, challenging to study theoretically due to their dynamic nature. Typical economic analyses of roscas stop at coarse ordinal welfare comparisons to other credit allocation mechanisms, leaving much of roscas' ubiquity unexplained. In this work, we take an algorithmic perspective on the study of roscas. Building on techniques from the price of anarchy literature, we present worst-case welfare approximation guarantees. We further experimentally compare the welfare of outcomes as key features of the environment vary. These cardinal welfare analyses further rationalize the prevalence of roscas. We conclude by discussing several other promising avenues.
    Date: 2022–03
  15. By: Castrillón, C.; Gómez, W; Montoya, J.
    Abstract: En este artículo se presenta una revisión en la que se identifican cuatro ramas distintas de la modelación de la economía informal en la literatura, a saber: modelos duales, modelos de elección ocupacional, modelos con mecanismos de incentivos y modelos de búsqueda. Para cada una de estas ramas, se presenta un modelo representativo que recoge las ideas principales, sus características, además de la forma en que se introduce el sector informal. Posteriormente, se da cuenta de las consecuencias del modelo para comprender la informalidad, adicional a algunas extensiones que amplían la propuesta del modelo representativo. Como resultado, dada la heterogeneidad del fenómeno, no puede hablarse con precisión de la existencia de un paradigma o una teoría “general†o dominante sobre la informalidad.
    Keywords: Economía informal; economía subterránea; mercados laborales informales; sectoresformales e informales; economía sumergida; arreglos institucionales
    JEL: E26 J46
    Date: 2021–10–04
  16. By: Acosta, E.
    Abstract: En Colombia se ha identificado la existencia de pobreza persistente a nivel regional. En el presente trabajo buscamos brindar evidencia sobre el impacto que tiene en especial la informalidad laboral sobre la persistencia en la pobreza a nivel de hogar. Para ello, proponemos estimar un modelo logit multinomial a partir de la Encuesta Longitudinal Colombiana (ELCA) la cual contiene información sobre hogares de ingresos bajos y medios. El periodo de estudio comprende las olas 2010, 2013 y 2016. A partir de la exploración de datos identificamos que mientras el 64,2 por ciento de los hogares pobres persistentes tienen jefes de hogar que son informales, en los hogares que son pobres de manera transitoria este porcentaje es de 48,5 y en los que no son pobres en ninguna de las olas es del 37,5 por ciento. Entre las variables relevantes para explicar la pobreza persistente se encuentran tener un jefe hogar trabajador informal o que no trabaje, el grado de dependencia económica, la región a la cual pertenece el hogar, el ahorro, los años de educación del jefe de hogar, el acceso al crédito y el índice de riqueza del hogar. En el caso de la pobreza transitoria, ni la edad ni la región resultan relevantes. Finalmente, el sexo y el estado civil no resultan ser importantes para explicar ningún tipo de pobreza.
    Keywords: persistencia en la pobreza; dinámicas de la pobreza; informalidad
    JEL: E26 I32 J21 J46 J82
    Date: 2021–11–10
  17. By: Lodoño, D.; Cortés, D.
    Abstract: El subempleo es una de las principales condiciones que enmarcan el trabajo de baja calidad o la insatisfacción de los trabajadores con sus condiciones laborales. En Colombia el subempleo ha tenido una histórica alta prevalencia que se complementa con otro problema laboral fundamental para el país, la informalidad. En este artículo se estudian las principales variables asociadas a altos niveles de subempleo objetivo, subempleo objetivo por horas, por ingresos y por competencias. Para esto se implementa un modelo probabilístico Probit cuyos resultados resaltan la incidencia de la informalidad sobre el subempleo objetivo de todos los tipos, junto con otras variables como ser cuenta propia, estar en una empresa mediana o en el sector de producción doméstica. Pensando en la posible interdependencia entre el subempleo y la informalidad se implementa un Probit Bivariado que muestra que existe un alto coeficiente de correlación entre estas dos condiciones y resalta la vulnerabilidad de algunos grupos sociodemográficos.
    Keywords: subempleo objetivo; subempleo por horas; subempleo por habilidades; subempleo por ingresos; informalidad
    JEL: J81 J21 J31 J46
    Date: 2022–01–21
  18. By: Batz, A.; Montes, J.; Romero, J.; Rubio, P.
    Abstract: La tasa de interés de los microcréditos es importante en la medida en la que representa un costo significativo bajo el cual los microempresarios, emprendedores y trabajadores informales acceden a la financiación. Por lo tanto, la relación entre la tasa de intervención de política monetaria y esta tiene un rol fundamental en el crecimiento y desarrollo socioeconómico de este grupo. Sin embargo, las tasas de interés de este producto crediticio exhiben cierta independencia de la estrategia de política monetaria implementada por el Banco de la República, y una mayor relación con la demanda, el riesgo asociado, la solvencia y estructura de costos de las instituciones microfinancieras, entre otros.
    Keywords: Microcréditos; tasa de interés; tasa de intervención; política monetaria
    JEL: E26 E41 E51 E52 E58
    Date: 2021–11–03

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