nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2022‒05‒23
two papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Does Informality Deter Tax Progressivity? By Enrico Rubolino
  2. Unregistered work among refugees: Evidence from a list experiment in Germany By Doerr, Annabelle; Hartmann, Carina; Sajons, Christoph

  1. By: Enrico Rubolino
    Abstract: In contexts with weak enforcement and widespread informality, the threat of tax evasion may constrain policy makers’ power to set tax policies optimally. This paper studies whether reducing informality by tackling tax evasion leads policy makers to increase statutory tax progressivity. I take advantage of an Italian policy that generated cross-municipality variation in the scope for tackling income and property tax evasion through stricter tax enforcement. Combining an event study design with municipality-level panel data on statutory tax rates, I show that the ability of the government to change the size of the informal sector tips the balance in favor of higher marginal tax rates for middle and top earners, lower for the poor. The tax hike was larger in places with higher pre-program inequality and where intrinsic tax compliance attitudes were weaker. As a result of larger tax collections, municipalities hired more workers and raised public spending. These results suggest that policies enforcing legal rules and payment of taxes have not only the power to foster tax capacity, but also to enhance the ability to pursue redistributive policies.
    Keywords: tax evasion, informality, tax enforcement, local taxes, tax progressivity
    JEL: H26 H71 H72
    Date: 2022–04
  2. By: Doerr, Annabelle; Hartmann, Carina; Sajons, Christoph
    Abstract: The integration of refugees in host countries' labor markets is complicated by structural barriers, missing formal qualification and language deficiencies. This leads to widespread concern that refugees may end up in informal and precarious employment relationships. Empirical evidence on the prevalence of unregistered work is missing, however, due to the sensitive and illegal nature of this phenomenon. In this paper, we conduct a list experiment to measure unregistered work among refugees in Germany. Our results indicate that 31% have had experience with an unregistered job since their arrival. Refugees who report that they do not have work permission show a significantly higher likelihood of experiencing unregistered work. Furthermore, the lack of post-secondary education and vocational degrees, and a low German proficiency predict the risk to work without registration.
    Keywords: Unregistered work, Informal employment, List experiment, Refugees, Germany, Survey experiment
    JEL: J46 J61 C83
    Date: 2022–01–04

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