nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2022‒11‒21
ten papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. The Impact of COVID-19 on Formal Firms: Micro Tax Data Simulations across Countries By Bachas,Pierre Jean; Brockmeyer,Anne; Semelet,Camille Marine
  3. Why Do Firms Pay Bribes ? Evidence on the Demand and Supply Sides of Corruption in Developing Countries By Gauthier,Bernard P.; Goyette,Jonathan; Kouame,Wilfried Anicet Kouakou
  4. Flexibilization and precarization of working conditions and labor relations in the perspective of app-based drivers By Jeová Torres Silva Júnior; Jailson Santana Carneiro; Patrick Wendell Barbosa Lessa; Carlos Leandro Soares Vieira
  5. Revisiting Labor Market Regulations in The Middle East and North Africa By Hatayama, Maho
  6. A Tale of Two Countries: Labor Market Profiles of Youth in Urban and Rural Cameroon By Botea, Ioana Alexandra; Del Bono, Mitja
  7. Improving Workers’ Performance in Small Firms : A Randomized Experiment on Goal Setting in Ghana By Cettolin, Elena; Cole, Kym; Dalton, Patricio
  8. Will We Ever Be Able to Track Offshore Wealth? Evidence from the Offshore Real Estate Market in the UK By Jeanne Bomare; Ségal Le Guern Herry
  9. Do French companies under-report their workforce at 49 employees to get around the law? By Philippe Askenazy; Thomas Breda; Flavien Moreau; Vladimir Pecheu
  10. The Effects of Introducing Withholding on Tax Compliance: Evidence from Pennsylvania’s Local Earned Income Tax By Sutirtha Bagchi

  1. By: Bachas,Pierre Jean; Brockmeyer,Anne; Semelet,Camille Marine
    Abstract: How is the COVID-19 pandemic affecting firm profits and tax payments in developingcountries This paper uses administrative corporate tax records from 10 low- and middle-income countries around theworld to provide plausible estimates. Modeling the lockdown-triggered revenue shock with simple and transparentassumptions, the analysis predicts that less than half of all firms will remain profitable by the end of 2020, about5-10 percent of the formal aggregate annual payroll will be lost, and firm exit rates will double. As a result, it isexpected that tax revenue remitted by the corporate sector will fall by at least 1.5 percent of baseline gross domesticproduct. Differences in sectoral composition and firms' cost structures generate heterogeneity in the results acrosscountries: wage subsidies are less effective in low-income countries and government revenue losses are smaller.
    Keywords: Labor Policies,Rural Labor Markets,Labor Markets,Plastics & Rubber Industry,Pulp & Paper Industry,Textiles, Apparel & Leather Industry,General Manufacturing,Construction Industry,Common Carriers Industry,Food & Beverage Industry,Business Cycles and Stabilization Policies,Employment and Unemployment,International Trade and Trade Rules
    Date: 2020–10–14
  2. By: Masagus M. Ridhwan (Bank Indonesia); Asep Suryahadi (SMERU Research Institute); Jahen F. Rezki (Institute for Economic and Social Research); Immanuel Satya Pekerti
    Abstract: We This study assesses the impact of COVID-19, measured by the reduction in work mobility and e-commerce growth, which has been expected to counteract the adverse effect of COVID-19, on the labor market outcomes of individual workers in terms of their employment prospects, work hours, total earnings, and earnings per hour in Indonesia. The data analyzed are combined from the labor force survey and ecommerce transaction values collected by Bank Indonesia, which is unique and publicly unavailable. The findings confirm that COVID-19 has adverse effects on workers’ labor market outcomes. However, e-commerce growth did not counteract the negative impact of COVID-19 as expected, but it still played a role as an employment buffer during the crisis. While e-commerce growth creates jobs, those jobs are mainly self-employment. Furthermore, e-commerce growth tends to suppress the earnings of workers. Our results imply that to optimize e-commerce to improve labor market outcomes beyond jobs creation in the informal sector, efforts are needed to increase the productivity of workers involved in e-commerce, such as through skills enhancement and other capacity-building programs.
    Keywords: COVID-19, labor market, mobility, e-commerce, Indonesia
    JEL: J22 J23 J46 J63 O33
    Date: 2021
  3. By: Gauthier,Bernard P.; Goyette,Jonathan; Kouame,Wilfried Anicet Kouakou
    Abstract: This paper empirically examines the demand and supply sides of bribery using World Bank Enterprise Survey data on 18,005 firms in 75 developing countries. It assesses the determinants of firms' bribe paying behavior and examine how bribe behavior affects two main sectors where corruption is rampant: taxation and government contracts. The paper shows that corruption in tax administration tends to be mainly a demand-side phenomenon. Paying a bribe requested by a public official is associated with a 16 percent increase in the share firms' sales not reported for tax purposes. In public procurement, the results suggest, on the contrary, that corruption is a supply-side phenomenon, with bribe transactions generally initiated by firms to secure public contracts. Firms supplying a bribe without a previous request by officials is associated with a 17 percent increase in the bribe paid to secure a government contract, more than three times the effect observed on the demand side of bribery.
    Keywords: Tax Law,Economic Adjustment and Lending,Taxation&Subsidies,Macro-Fiscal Policy,International Trade and Trade Rules,Tax Administration,Public Sector Economics,Public Finance Decentralization and Poverty Reduction,Information Technology
    Date: 2020–10–19
  4. By: Jeová Torres Silva Júnior (UFCA - Federal University of Cariri); Jailson Santana Carneiro (UFRPE - Universidade Federal Rural do Pernambuco); Patrick Wendell Barbosa Lessa (Universidade Federal do Cariri (UFCA)); Carlos Leandro Soares Vieira (Universidade Federal do Cariri (UFCA))
    Abstract: Purpose The challenges of the growth of the sharing economy are becoming more and more noticeable and urgent, especially concerning labor relations (e.g. uberization). The purpose of this paper is to understand what app-based drivers think of working conditions and labor relations. Design/methodology/approach The research was carried out in three stages: bibliographical and documental research, and two empirical research, a quantitative one with the application of a questionnaire in a sample of 54 respondents and another qualitative one using an interview script with ten drivers. For data analysis, the abductive method and the content analysis technique were used. Findings The results reveal they have an exhausting labor routine, by checking that they work more hours per week than those who have a formal job. They are driven mainly by the extra income and flexibility that digital platforms of the sector of shared private transportation can offer, although the costs intrinsic to the activity often affect their revenues significantly. Research limitations/implications The number of answers from women was very small, which hinders the analysis of the potential specificities of women app-based drivers. Future studies could focus on this public for a more precise analysis, to bring the discussion on gender to the working context of app-based drivers. Practical implications The authors' intention with the research reports was to make them relevant, leading to effective policies concerning working conditions and labor relations in the sharing economy, and to stimulate other surveys to understand the activity of an app-based driver of shared private transportation. Originality/value The authors' research and this article contribute to the discussion on new work relationships, motivations and (dis)satisfaction with the activity, from the perspective of app-based drivers.
    Keywords: Uberization,Flexibilization of work,Precarization of work,App-based drivers,Platform workers,Sharing economy
    Date: 2022–04–12
  5. By: Hatayama, Maho
    Abstract: Labor regulations are important determinants of resource allocation, productivity, and labor market outcomes. They can protect workers’ rights, enhance job security, and improve working conditions. However, overly restrictive regulations can also increase business costs, becoming barriers to creating formal employment, particularly for vulnerable workers. This paper analyzes the key characteristics of labor market regulations in the Middle East and North Africa (MENA) and benchmarks them against international practices. The main objective is to identify strengths and weaknesses in the regulations and to inform governments about policy options to enhance employment outcomes in the region. The paper focuses on labor laws and regulations concerning hiring, working hours, minimum wage, redundancy rules and cost, unemployment insurance, labor tax and social security contributions, and legal frameworks affecting women’s work. This paper finds that the region has generally flexibly hiring rules, but that redundancy regulations are relatively rigid and costly compared to international practices. Statutory minimum wages and labor taxes are not very high, with the exception of a few countries. Although many countries have made efforts to remove legal barriers for women workers, discriminatory laws still restrict their participation in the labor market. While labor market regulations vary by country, the findings suggest areas where there is clear scope to improve the design and implementation of labor market regulations to facilitate stronger formal labor demand and to enhance efficient resource allocation; and at the same time, to strengthen compliance to provide necessary protections to workers.
    Keywords: minimum wage; employee will re; gulf cooperation council; access to social security benefits; labor market regulation; female labor force participation; marginal product of labor; high level of employment; social security contribution rate; labor force participation rate; flexibility of labor markets; migration for employment; employer having; targeted job search assistance; cost of living; annual leave; labor regulation\
    Date: 2022–01–24
  6. By: Botea, Ioana Alexandra; Del Bono, Mitja
    Abstract: Cameroon’s high employment levels mask widespread precariousness and rural-urban inequality. Labor market vulnerability-either detachment or weak attachment-is particularly acute among youth (ages 15 to 35), who are often uninterested in agriculture yet unable to access better opportunities in urban areas. Using Latent Class Analysis (LCA), a non-parametric method that segments a heterogeneous population into groups sharing similar characteristics, we identify distinct profiles of youth experiencing labor market vulnerability. The largest groups in urban and rural areas consist of mostly men with some education who work full time in the informal sector, either as own-account workers or subsistence farmers. In addition, we identify five groups as priorities for policy intervention. First, two groups making up 9 percent of out-of-school youth, predominantly married women, are involuntarily inactive and present an opportunity for improved human capital utilization. Second, a third group (14 percent) includes women in rural areas employed as contributing family workers, while two other groups (12 percent) comprise women facing multifold vulnerabilities (i.e., a combination of unpaid, temporary, and part-time work). Tailored interventions for these three groups would most impact poverty reduction
    Keywords: rural employment; Agriculture; rural transformation; labor productivity; rural area; international food policy research institute; productivity gap; productive employment; agricultural self-employment; account advance rate; corporate code of conduct; Drivers of Economic Growth; agricultural employment; food system; surplus labor; Agricultural Research and Development; research and development policy; rural labor market; employment in agriculture; informal sector employment; number of workers; rural labor force; agricultural labor; Agricultural Value Chain; off-farm employment; investments in agriculture; wage employment; high population density; gender wage gap; agricultural labor force; agricultural wage labor; Job Quality; rural youth; global value chain; employment condition; working condition; minimum wage; agricultural transformation; dual economy
    Date: 2022–08–22
  7. By: Cettolin, Elena (Tilburg University, Center For Economic Research); Cole, Kym; Dalton, Patricio (Tilburg University, Center For Economic Research)
    Keywords: Behavioral Constraints; Goals setting; Management Practices; Small firms; Informal Businesses
    Date: 2022
  8. By: Jeanne Bomare (PSE - Paris School of Economics - 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); Ségal Le Guern Herry (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper provides evidence of the growing importance of real estate assets in offshore portfolios. We study the implementation of the first multilateral automatic exchange of information norm, the Common Reporting Standard (CRS), which introduces cross-border reporting requirements for financial assets but not for real estate assets. Exploiting administrative data on property purchases made by foreign companies in the UK, we show that the implementation of the CRS led to a significant increase of real estate investments from companies incorporated in the tax havens that were the most exposed to the policy. We confirm that this increase comes from company owners of countries committing to the new standard by identifying the residence country of a sub-sample of buyers using the Panama Papers and other leaked datasets. We estimate that between £16 and £19 billion have been invested in the UK real estate market between 2013 and 2016 in reaction to the CRS, suggesting that at the global scale between 24% and 27% of the money that fled tax havens following this policy were ultimately invested in properties.
    Date: 2022–06–05
  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 - 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, 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, IPP - Institut des politiques publiques); Flavien Moreau (FMI - Fond Monétaire International - FMI); Vladimir Pecheu (Aix-Marseille School of Economics)
    Abstract: Various legal obligations in terms of social dialogue, profit sharing and accounting apply to French companies when they reach the threshold of 50 employees. This policy brief shows that a significant proportion of companies voluntarily under-report their workforce below this threshold and this allows them to avoid their obligations. Compliance with the law in terms of social dialogue or profit-sharing thus appears to be linked to the number of employees that companies declare and not to their actual workforce. These results illustrate how the labor code can be circumvented in a complex regulatory environment and in the absence of sufficient means of oversight. They invite reflection on the use of more direct and effective methods of monitoring compliance with the law. They also invite caution in considering the results of several recent studies that quantify the cost of legal obligations at the 50-employee threshold, assuming that they are fully respected in practice.
    Date: 2022–03
  10. By: Sutirtha Bagchi (Department of Economics, Villanova School of Business, Villanova University)
    Abstract: This paper examines Act 32 of the Pennsylvania state legislature which mandated the introduction of withholding for the local earned income tax (EIT) for all employees and the consolidation of a fragmented collection system to one collector per county effective January 1, 2012. I find that the act resulted in increased compliance with the EIT of about 14 percent, with the increased compliance driven entirely by an increase in revenues as opposed to changes to the tax base or rates. I confirm this result using a differences-in-differences analysis that contrasts tax compliance for school districts in Pennsylvania with those in Iowa – the only other state where a majority of school districts levy a local income tax. Falsification exercises examining compliance with the property tax confirm that Act 32 did not impact the property tax in either the event study or the differences-in-differences analysis.
    Keywords: Earned income tax; Tax compliance; Withholding; Event Study
    JEL: H26 H71 R51
    Date: 2022–11

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