nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2023‒01‒02
five papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Revenue losses from corporate tax avoidance: estimations from the UNU-WIDER Government Revenue Dataset By Alessandro Chiari
  2. FDI Flows and the Effects of the Shadow Economy: Evidence from Gravity Modelling By Tobias Zander
  3. Immigration, integration, and the informal economy in OECD countries By Oussama Ben Atta; Isabelle Chort; Jean-Noël Senne
  4. The “right to the city centre”: political struggles of street vendors in Belo Horizonte, Brazil By Nogueira, Mara; Shin, Hyun Bang

  1. By: Alessandro Chiari (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: Corporate profit shifting to tax havens negatively impacts corporate tax revenue, particularly in low-income countries. Two studies published in 2016 and 2018 have proven this correlation using data from 2013. In this paper, I use the most recent version of the UNU-WIDER Government Revenue Dataset (GRD) to estimate government revenue losses in 2019 and to observe possible changes associated with the release of the new dataset. My estimations indicate that global tax revenue losses in 2019 are around USD 480 billion, compared to USD 500 billion in 2013. In terms of GDP percentage, my estimations confirm the presence of a higher share of losses in low-income, and more generally, in non-OECD countries, and they show a higher intensity of tax avoidance practices in those countries. The results also suggest that the total level of tax revenue losses has plateaued, with no increase in losses occurring since 2013.
    Keywords: international taxation; corporate income tax; tax avoidance; tax havens; base erosion; profit shifting; income inequality; developing countries
    JEL: F21 F23 H25
    Date: 2022–06
  2. By: Tobias Zander (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))
    Abstract: This paper analyzes the question of if the size of shadow economy has an effect on foreign direct investment (FDI) flows and what effects, if any, there are. Since about 1990, FDI has become the second crucial pillar of economic globalization in OECD countries and worldwide; such FDI inward and outward flows contribute to higher per capita income and international technology transfer. To analyze this question, both fixed effects as well as dyadic fixed effects gravity models are used on an OECD-only dataset that allow for data on bilateral, bidirectional FDI flows for the years from 1992-2018. The empirical results suggest a positive effect of the shadow economy for FDI target countries and a negative effect for FDI origin countries. Additional findings via an interaction term show that the shadow economy can counteract negative effects of an increase in government size on FDI inflows. In a policy perspective, changes of the size of the shadow economy – typically taking place in periods of recession, in a high taxation environment or in the context of a pandemic shock – should be carefully monitored by economic policymakers as well as by policy monitoring international organizations such as the IMF and the EBRD. If a group of (OECD) countries decides to adopt anti-shadow economy economic policies, there will be pressure on other (OECD) countries to also adopt similar policies since the difference between the size of the shadow economy in the source country and the host country has a negative impact on FDI inflows. Thus, FDI could indirectly be a catalyst for reforms.
    Keywords: International Economics, Foreign Direct Investment, Gravity Model, Shadow Economy
    JEL: C23 E26 F21 F23
    Date: 2022–08
  3. By: Oussama Ben Atta (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay, TREE - Transitions Energétiques et Environnementales - UPPA - Université de Pau et des Pays de l'Adour - CNRS - Centre National de la Recherche Scientifique); Isabelle Chort (TREE - Transitions Energétiques et Environnementales - UPPA - Université de Pau et des Pays de l'Adour - CNRS - Centre National de la Recherche Scientifique, IUF - Institut Universitaire de France - M.E.N.E.S.R. - Ministère de l'Education nationale, de l’Enseignement supérieur et de la Recherche, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics); Jean-Noël Senne (RITM - Réseaux Innovation Territoires et Mondialisation - Université Paris-Saclay)
    Abstract: This article assesses the impact of immigrant and asylum seeker inflows on the size of the informal sector in host countries from a macroeconomic perspective. We use two indicators of informality provided by Medina and Schneider (2019) and Elgin and Oztunali (2012) combined with migration data from the OECD International Migration Database and data on asylum seeker flows from the UNHCR for the period 1997-2017. We estimate a first-difference model, instrumenting immigrant and asylum seeker flows by their predicted values derived from the estimation of a pseudo-gravity model. Results suggest that both immigrant and asylum seeker inflows increase the size of the informal sector at destination, but the size of the effect is very small: a one percentage point increase in the stock of immigrants as a share of population leads to an increase of the informal sector as a share of GDP of 0.05-0.06 percentage points. Unsurprisingly, the effect is about four times larger for asylum seeker flows, but remains economically insignificant. We investigate several potential channels, and find that integration policies do matter. We find no impact of imported norms or institutions, but rather that the effect is larger in destination countries with a large informal sector. A larger diversity in incoming flows is associated with a smaller impact on the informal sector. Finally, we document the dynamics with a VAR model.
    Keywords: migration,informal economy,asylum seekers,integration policies,shadow economy
    Date: 2022–10–25
  4. By: Nogueira, Mara; Shin, Hyun Bang
    Abstract: The article aims to investigate the relations between work and urban space, focusing on the struggles of street vendors for the ‘right to the city centre’ in Belo Horizonte, Brazil. We join critical debates on Brazil’s internationally praised urban reform by focusing on informal workers. Beyond lacking the protection of labour laws, the ‘right to the city’ (RttC) of such workers has been consistently denied through restrictive legislations and policies. In the context of the ‘crisis’ of waged labour, we explore the increasing centrality of urban space for working-class political struggles. Looking at Belo Horizonte, the article traces the relation between urban participatory democracy and the development of legal-institutional frameworks that restricted street vendors’ access to urban space in the city. In the context of an urban revitalisation policy implemented in 2017, we then explore the use of legal frameworks to remove street vendors from public areas of the city and the resulting political resistance movement. The discussion focuses on the emergence of the Vicentão Occupation, a building squatted by homeless families and street vendors in conflict with the local state. Through this case, we explore the radical potential of contemporary articulations of Henri Lefebvre’s framework emerging from the confluence of diverse local urban struggles for ‘the right to the city centre’. Ultimately, we argue for an understanding of the RttC as a process and a site of continual struggle whose terrain is shaped, but cannot be replaced by, legal frameworks that need to be constantly contested and evolving to reflect the shifting socio-spatial relations.
    Keywords: crisis of labour; informality‌; popular economies; the right to the city; urban politics; Taylor & Francis deal
    JEL: R14 J01
    Date: 2022–11–01
  5. By: Alexander Sasu; Graham Squires; Arshad Javed
    Abstract: Land banking practices can fail in efficiently controlling the value of land. These failures stem from the difficulty in reducing speculative holdings to levels exceeding the size of the banked lands. Such underlining traits of the practice have been drawn from public land banking practices in formal land market settings. Public practices are markedly different to private and quasi-public land banking practices in an indigenous informal land market. Consequently, this paper explores how indigenous informal land markets are influenced by private land banking practices and land values under new land tenure regimes post-Ghana's land reforms. Semi-structured interviews with thirty-three participants made up of experts and stakeholders were drawn from four case studies within the Ghanaian indigenous informal land market. We find that land bankers are banking large tracts of indigenous informal lands as capital investments for profits through land dispositions. This is different from the possession of land banks as a production factor for their housing development moves suggested to indigenous heads. The paper recommends a revisit of discussions on the enforcement and monitoring of the processes required under the lands commission guidelines for large-scale land transactions.
    Keywords: Ghana; indigenous informal land market; Land banking; Land Values; new customary land tenure
    JEL: R3
    Date: 2022–01–01

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