nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2022‒05‒02
three papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Firms behavior around tax thresholds in Albania during the 2015 anti-informality campaign - Bunching features, persistence and growth implications By Rrumbullaku, Oltion
  2. Informal Micro, Small, and Medium-Sized Enterprises and Digitalization: Evidence from Surveys in Indonesia By Shinozaki, Shigehiro
  3. When bulldozers loom: informal property rights and marketing practice innovation among emerging market micro-entrepreneurs By Hassan, Magda; Prabhu, Jaideep; Chandy, Rajesh; Narasimhan, Om

  1. By: Rrumbullaku, Oltion
    Abstract: This article studies the effects of tax thresholds on the behavior of small firms using the tax administration data of the universe of the Albanian firms during and after the anti-informality campaign of the year 2015. The main comparisons are between the year 2014, 2015 and 2016. The features of the firms that did bunch in 2015 were evaluated through a Probit regression. The bunching did persist through the three years in discussion, so it is not a temporary behavior. At the end, the tax threshold does influence in the growth of the firms, especially those firms that have a turnover just under the first threshold.
    Keywords: VAT threshold, Value-added tax, bunching, small firms
    JEL: H21 H25 H26 H32
    Date: 2021–05–01
  2. By: Shinozaki, Shigehiro (Asian Development Bank Institute)
    Abstract: Most micro, small, and medium-sized enterprises (MSMEs) operate informally. While informal sectors are thought to contribute less to national economic development, MSMEs are a driving force behind national economic growth. Thus, formalizing informal MSMEs is critical to boosting national productivity, creating quality jobs, and promoting inclusive growth. We examine the coronavirus disease (COVID-19) impact on informal MSMEs in Indonesia by using a linear probability model regression and descriptive analysis based on evidence obtained through year-long surveys from March 2020 to May 2021. We also assess the extent of the digital transformation and challenges brought on by the pandemic and derive policy implications. The estimates found two streams of business clusters among informal MSMEs—contracting firm groups that suffered through the pandemic and those that benefited. The COVID-19 crisis and mobility restrictions led many informal MSMEs to accelerate digitalization. But digitally operated firms could not always operate successfully during the pandemic, splitting businesses into those profitable or less profitable.
    Keywords: COVID-19; informality; shadow economy; MSMEs; digitalization; SME development; access to finance; SME policy; Indonesia
    JEL: D22 G20 L20 L50
    Date: 2022–03
  3. By: Hassan, Magda; Prabhu, Jaideep; Chandy, Rajesh; Narasimhan, Om
    Abstract: Micro-entrepreneurs represent the most common type of business in the world, and marketing is a primary means by which they earn their livelihoods. They are especially numerous in emerging markets, and many live precarious lives characterized by poverty and potentially devastating exogenous shocks. This paper examines the marketing practices of microentrepreneurs by studying grocery retailers in a large slum in Cairo, Egypt. Employing detailed data on the marketing practices of these retailers, the paper examines why some micro-entrepreneurs engage in innovation in their marketing practices (and perform better), while others fail to do so. We highlight the causal effect of an important but rarely studied factor – informal property rights – on innovation in marketing practices among microentrepreneurs. Because few micro-entrepreneurs in the context we study have access to formal property rights, the threat of expropriation looms large in their lives. We show that those micro-entrepreneurs who possess their stores (without actually owning them) are substantially less likely to innovate in their marketing practices than those who lease their stores. We make use of an exogenous shock to property rights laws to assess the causal impact of informal property rights on innovation in marketing practices.
    Keywords: micro-entrepreneurs; lease; possession; informal property rights; innovation in marketing practice; performance
    JEL: R14 J01
    Date: 2022–01–06

This nep-iue issue is ©2022 by Catalina Granda Carvajal. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.