nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2023‒02‒06
four papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Keeping the best of two worlds: Linking CGE and microsimulation models for policy analysis By Konstantīns Beņkovskis; Ludmila Fadejeva; Anna Pluta; Anna Zasova
  2. Tariff Evasion, the Trade Gap, and Structural Trade By Ronald B. Davies; Zuzanna Studnicka
  3. Visual Nudges: How Deterrence and Equity Shape Tax Compliance Attitudes and Behaviour in Rwanda By Scarpini, Celeste; Santoro, Fabrizio; Mascagni, Giulia
  4. Mercado laboral y determinantes de la informalidad en Bogotá By Erika Schutt; Jose Antonio Hernández; Daniel Eduardo Franco; Erika Schutt; Jose Antonio Hernández; Daniel Eduardo Franco

  1. By: Konstantīns Beņkovskis (Latvijas Banka); Ludmila Fadejeva (Latvijas Banka); Anna Pluta (The Baltic International Centre for Economic Policy Studies); Anna Zasova (The Baltic International Centre for Economic Policy Studies)
    Abstract: In this paper, we link a CGE model with the tax-benefit microsimulation model EUROMOD for Latvia. The model linkage is done using an iterative top-down bottom-up approach, ensuring the convergence of changes in disposable income, employment and wage in both models. We also incorporate the unreported wage payments in CGE and EUROMOD to account for the substantial labour tax non-compliance in Latvia and improve the modelling of the fiscal sector. Several simulations demonstrate the advantages of the joint CGE-EUROMOD system over the individual macro and microsimulation models. The lack of income distribution aspect and the scarcity of fiscal instruments in CGE can be overcome by the features of EUROMOD. The CGE model, on the other hand, provides macroeconomic spillovers that are missing in the simulations of EUROMOD.
    Keywords: EUROMOD, CGE model, model linkage, informal sector
    JEL: C68 D58 D90 J46
    Date: 2023–01–17
  2. By: Ronald B. Davies; Zuzanna Studnicka
    Abstract: While it is well-recognized that there are differences in the trade values reported by exporters and importers, a literature has emerged linking this trade gap to tariff evasion. These efforts, however, lack a structural theoretic underpinning and limit their product-level investigations to a small number of countries. Our first contribution is to provide a structural model of endogenous tariff evasion, one which then highlights the importance of both tariffs and border enforcement. Our second contribution is to use a global, product-level dataset from 2002-2019, the analysis of which is consistent with our model’s predictions.
    Keywords: tariff evasion, structural gravity, trade gap, border controls
    JEL: F13 F14 H26
    Date: 2022
  3. By: Scarpini, Celeste; Santoro, Fabrizio; Mascagni, Giulia
    Abstract: Tax administrations in low-income countries engage in a variety of interventions to improve taxpayer compliance and close their countries’ financing gap. With this aim, the Rwanda Revenue Authority (RRA) has implemented measures of enforcement, facilitation, and promotion of professionalism and trust in the revenue administration. Despite these efforts, the country’s tax-to-GDP ratio remains slightly below the average for sub-Saharan African countries. Thus, understanding the drivers of compliance and how to leverage them is crucial, especially since Covid-19 has exacerbated revenue needs in LICs. Remote engagement with taxpayers through mass media communication represents a promising solution, as it is a cheap option that budget-constrained revenue administrations could use to improve compliance. Our survey experiment implemented in Rwanda sheds light on the potential impact of videos as a new way to deliver tax messages. We randomly exposed over 2, 000 small and medium firms filing for CIT and PIT to two information videos, and a control group, and surveyed them before and after the viewing. The videos were two-minute-long animated films on tax matters, focusing respectively on deterrence and equity of the tax system1 - which are considered two key factors explaining compliance. Using combined survey and administrative data, we identified the videos’ causal impact on the taxpayers’ perceptions and behaviours. Summary of Working Paper 145 by Celeste Scarpini, Fabrizio Santoro and Giulia Mascagni.
    Keywords: Governance,
    Date: 2023
  4. By: Erika Schutt; Jose Antonio Hernández; Daniel Eduardo Franco (Departamento de Economía, ANIF Centro de estudios económicos); Erika Schutt (Departamento de Economía, ANIF Centro de estudios económicos); Jose Antonio Hernández (Departamento de Economía, ANIF Centro de estudios económicos); Daniel Eduardo Franco
    Abstract: En este documento se analizan los problemas estructurales del mercado laboral en la ciudad de Bogotá y se estudian los principales determinantes de: (i) la informalidad laboral a través de un modelo de regresión logística (logit) y uno de serie de tiempo, a partir de datos de la Gran Encuesta Integrada de Hogares (GEIH) del DANE; y de (ii) la informalidad empresarial, a través de otro modelo de regresión logística (logit) utilizando los datos recolectados en la primera Encuesta MiPyme de ANIF (EMP), 2021. Los resultados principales muestran que la herramienta más eficaz para promover la formalidad es la educación y que el nivel de ingreso del hogar disminuye la probabilidad de ser informal en la capital. A su vez, el aumento del salario mínimo ha tenido un fuerte efecto en el crecimiento de la informalidad en la ciudad. En cuanto a la informalidad empresarial, se encontró que, un importante determinante de la formalidad es la entrada a mercados externos. A su vez, el acceso financiero, el tipo de contabilidad y el tamaño de la empresa son otros determinantes de la formalidad. Por último, los resultados muestran que, mientras que el pertenecer al sector de la industria está asociados con una reducción en la probabilidad de ser una empresa informal, pertenecer al sector servicios aumenta la probabilidad de serlo. Finalmente, se presentan una serie de recomendaciones de política encaminadas a: (i) garantizar protección social a todos los ciudadanos, (ii) modernizar el mercado laboral, (iii) generar empleo femenino (iv) impulsar el empleo de jóvenes y; (v) crear empresas formales.
    Keywords: North-South, Labor Economics, Labor Market Structures,
    JEL: R23
    Date: 2022–07

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