nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2023‒03‒13
nine papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Dynamic Tax Evasion and Growth with Heterogeneous Agents By Francesco Menoncin; Andrea Modena
  2. Informality, Education-Occupation Mismatch, and Wages: Evidence from India By Bahl, Shweta; Sharma, Ajay
  3. The Effects of the Venezuelan Refugee Crisis on the Brazilian Labor Market By Hugo Sant'Anna; Samyam Shrestha
  4. Assessing the impact of an intervention to withhold value-added tax in Zambia By Kwabena Adu-Ababio; Aliisa Koivisto; Andreya Kumwenda; Gregory Chileshe; John Mulenga; Mutemwa Mebelo; Ian Mufana; Yenda Shamabobo
  5. The association between women’s economic participation and physical and/or sexual domestic violence against women: A case study for Turkey By Angela Greulich; Aurélien Dasré
  6. The design of presumptive tax regimes By Mariona Mas-Montserrat; Céline Colin; Eugénie Ribault; Bert Brys
  7. Impact analysis of automatic exchange of financial information in tax matters for business and natural persons By Levashenko A.D.; Koval A.A.
  8. How to Mitigate the Impact of Economic Downturns on Labor Markets: Evidence from Nicaragua By Ms. Sandra Marcelino; Mariana Sans
  9. Estudios sectoriales sobre el riesgo de facturación fraudulenta en las exportaciones colombianas de café y aceite de palma By Víctor Saavedra; Miguel Ángel Carvajal

  1. By: Francesco Menoncin; Andrea Modena
    Abstract: We develop a tractable model of a production economy in which public capital improves aggregate productivity and the taxpayers have heterogeneous evasion opportunities. We show that, by issuing bonds, compliant taxpayers supply the evaders with an instrument to hedge against auditing risks, thereby expanding their evasion capacity. Moreover, we demonstrate that a higher share of tax evaders reduces the economy’s total factor productivity but has a hump-shaped relationship with the growth rate of aggregate capital.
    Keywords: Dynamic tax evasion; general equilibrium; growth; heterogeneous agents
    JEL: E20 G11 H26
    Date: 2023–02
  2. By: Bahl, Shweta; Sharma, Ajay
    Abstract: This article examines the intertwining relationship between informality and education-occupation mismatch (EOM) and the consequent impact on the workers' wages. In particular, we discuss two issues - first, the relative importance of informality and education-occupation mismatch in determining the wages; and second, the relevance of EOM for formal and informal workers. The analysis reveals that although both informality and EOM are significant determinants of wages, the former is more crucial for a developing country like India. Further, we find that EOM is one of the crucial determinants of wages for formal workers, but it is not critical for informal workers. The study highlights the need for considering the bifurcation of formal-informal workers to understand the complete dynamics of EOM especially for developing countries where informality is predominant.
    Keywords: Informality, Education-Occupation Mismatch, India
    JEL: I25 I31 O17
    Date: 2023
  3. By: Hugo Sant'Anna; Samyam Shrestha
    Abstract: We use administrative panel data on the universe of Brazilian formal workers to investigate the effects of the Venezuelan crisis on the Brazilian labor market, focusing on the state of Roraima, where the crisis had a direct impact. The results showed that the average monthly wage of Brazilians in Roraima increased by about 3 percent during the early stages of the crisis compared to the control states. The study found negligible job displacement and evidence of Brazilians moving to positions with fewer immigrants. We also found that immigrant presence in the formal sector potentially pushed wages downwards, but the presence of immigrants in the informal sector offsets the substitution effects. Overall, the study highlights the complex and multifaceted nature of immigration on the labor market and the need for policies that consider the welfare of immigrants and native workers.
    Date: 2023–02
  4. By: Kwabena Adu-Ababio; Aliisa Koivisto; Andreya Kumwenda; Gregory Chileshe; John Mulenga; Mutemwa Mebelo; Ian Mufana; Yenda Shamabobo
    Abstract: Improving tax collection is essential if developing economies are to avoid over-reliance on external donor funds and loans. Revenue authorities in the Global South have recently adopted new policy tools to improve domestic revenue mobilization through taxes. One such new policy is a withholding system for value-added tax (VAT). In this study, we investigate the impact of adopting a system for withholding value-added tax on VAT collection in Zambia. While similar systems are in place in many countries, empirical research into their impact is still limited and inconclusive.
    Keywords: Value-added tax, Tax compliance, Tax administration, Africa
    Date: 2023
  5. By: Angela Greulich (CRIS - Centre de recherche sur les inégalités sociales (Sciences Po, CNRS) - Sciences Po - Sciences Po - 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); Aurélien Dasré (CRESPPA - Centre de recherches sociologiques et politiques de Paris - UP8 - Université Paris 8 Vincennes-Saint-Denis - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We test in how far women's economic participation can be associated with physical and/or sexual domestic violence against women in Turkey, by mobilizing the Survey "National Research on Domestic Violence against Women in Turkey" (wave 2014). Several studies found that economically active women have a similar, if not a higher risk of experiencing domestic violence than inactive women in Turkey, as well as in other emerging countries. We challenge these findings for Turkey by distinguishing between formal and informal labor market activities as well as between women who do not work because their partner does not allow them to and women who are inactive for other reasons. To increase the control for endogeneity in this cross-sectional setting, we apply an IV-approach based on cluster averages. We find that, while overall employment for women cannot be associated with a lower risk of experiencing domestic violence for women in Turkey, those women who participate in the formal labor market and those women who contribute at least the same as their partner to household income are less exposed to physical and/or sexual domestic violence than their counterparts. Distinguishing between formal and informal employment is thus important when it comes to investigate the association between women's economic activity and domestic violence. This is especially the case in a country like Turkey, which currently undergoes important socioeconomic changes and where women in formal and informal employment have therefore very different socioeconomic backgrounds.
    Date: 2022–11–16
  6. By: Mariona Mas-Montserrat; Céline Colin; Eugénie Ribault; Bert Brys
    Abstract: Presumptive tax regimes, also known as simplified tax regimes, simplify the tax compliance process for micro and small businesses. By reducing tax compliance costs and levying lower tax rates compared to the standard tax system, these regimes aim at encouraging business formalisation and compliance. They are particularly useful in situations where actual taxable income is difficult to quantify as a taxpayer’s tax base is determined using alternative indicators. Although these regimes exist in many tax systems, they vary greatly in their design. This OECD working paper provides an analytical framework for characterising and comparing these regimes. It also highlights key design aspects that deserve further consideration and lists a series of best practices on the design and administration of these regimes.
    Keywords: micro and small business taxation, presumptive tax regimes, simplified tax regimes, tax policy design
    JEL: H25
    Date: 2023–02–14
  7. By: Levashenko A.D. (The Russian Presidential Academy Of National Economy And Public Administration); Koval A.A. (The Russian Presidential Academy Of National Economy And Public Administration)
    Abstract: The paper analyzes the legal relationship connected with the development of instruments for automatic exchange of tax information, which are being developed at the OECD level. Subject of the research is analysis of the automatic exchange instruments and the results of its implementation in the practice of states. Relevance of the research is based on the expanding use of automatic exchange of tax information between countries and the issues arising in connection with its application, the emergence of new tax programs aimed at increasing tax transparency. The goal of the study was to identify the issues of automatic exchange and develop proposals for the development of tax exchange instruments. Research methodology was based on the use of methods of logical, system, formal legal and comparative legal analysis. The authors analyze existing instruments for the automatic exchange of information on foreign accounts, cross-country reports on the activities of multinational corporations, and instruments for exchanging information on the sellers’ activities on e-commerce platforms. The research lays the foundations for the development of multilateral instruments for automatic exchange of tax information at the OECD level. To minimize the risks of tax evasion and improve the efficiency of the automatic exchange of tax information, the study proposes steps aimed at increasing the efficiency of Russia's participation in the OECD automatic exchange instruments - CRS MCAA and CbC MCAA. Based on the research, the following findings were made. First, based on the analysis of the legislation of individual countries and the first Peer Review published by the OECD in December 2020, one may conclude that most jurisdictions have a satisfactory legal framework, while in some countries, including Russia, it requires significant improvements. Second, a number of problems remain in the implementation of the standard for automatic exchange of information in Russia, which are primarily associated with the lack of effective mechanisms of responsibility for violation of self-certification and with the retention of currency control requirements. The results of the research include proposals for the development of automatic exchange instruments both on the OECD platform and in Russia. The main recommendations for the development of automatic tax exchange instruments at the OECD level were: improvement of the Peer Review instrument; development of the Model rules for mandatory disclosure on CRS avoidance arrangements and opaque offshore structures at the OECD level; creation of an international legal framework for the unimpeded use of CRS MCAA data for the purposes of combating money laundering and anti-corruption; further improvement and development of the CRS MCAA instrument for automatic exchange of information on foreign accounts. In particular, to improve the efficiency of the instrument, it is necessary to include digital currencies and crypto assets in its operation. The main recommendations for increasing the efficiency of Russia's participation in the automatic exchange of tax information instruments were: introduction of liability for false self-certification of clients and strengthening liability of financial institutions for violating the requirements of the General Reporting Standard; formation of a position regarding the identification of new entities (operators of investment platforms and the operators of the information system issuing digital financial assets) as financial market organizations for the purpose of automatic exchange; abolition of restrictions on foreign accounts and the development of automatic exchange, including with the EAEU countries; implementation of measures to combat white-collar crimes, including the creation of an institution protecting whistleblowers, the introduction of special provisions on liability, etc.; development of guidelines for risk evasion schemes, including CBI / RBI; introduction of a public CbCR (considering the EU proposals).
    Keywords: automatic exchange of tax information, OECD, cross-country reporting, CRS MCAA, CBC MCAA
  8. By: Ms. Sandra Marcelino; Mariana Sans
    Abstract: This paper studies the drivers of the labor market performance in Nicaragua with a particular focus on informality, to identify vulnerable groups during economic downturns; and estimates the speed of adjustment of employment to shocks. The paper compares this experience with the ones in other CAPDR countries (Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Panama). Our findings are that while the high countercyclical informality in Nicaragua has been the active margin of adjustment during economic downturns mitigating unemployment, the trade-off has been a lower speed of adjustment to shocks hampering the country’s ability to revert to its potential. Policy recommendations relate to mitigating the impact of downturns on employment in Nicaragua, easing adjustments and inequalities in the labor market to hasten the employment recovery and thus, support growth.
    Date: 2023–02–03
  9. By: Víctor Saavedra; Miguel Ángel Carvajal
    Abstract: En el presente estudio se desarrollan dos metodologías las cuales son aplicadas a las exportaciones de dos productos, el café y el aceite de palma, con la finalidad de dimensionar y caracterizar la facturación fraudulenta, la cual hace referencia a la manipulación intencional de la cantidad, el valor y/o el tipo de producto involucrado en una transacción comercial internacional, llevada a cabo por al menos una parte involucrada en el intercambio. Esta manipulación deliberada representa oportunidades para los grupos criminales, tales como el movimiento de dinero entre fronteras producto de sus actividades ilegales, el financiamiento del terrorismo o de grupos armados, el lavado de dinero, la evasión de impuestos sobre estos recursos, entre otros. Para cada sector (café y aceite de palma) se expondrá un contexto sobre el mismo, relacionando al sector económico con su relevancia económica, posibles relacionamientos del sector con el financiamiento del conflicto armado y regulaciones y políticas propias del sector.****** Abstract: In the present study, two methodologies are developed which are applied to the exports of two products, coffee and palm oil, with the purpose of sizing and characterizing fraudulent invoicing, which refers to the intentional manipulation of the quantity, the value and/or type of product involved in an international commercial transaction, carried out by at least one party involved in the exchange. This deliberate manipulation represents opportunities for criminal groups, such as the movement of money across borders resulting from their illegal activities, the financing of terrorism or armed groups, money laundering, and tax evasion on these resources, among others. For each sector (coffee and palm oil) a context will be presented about it, relating the economic sector with its economic relevance, possible relationships of the sector with the financing of the armed conflict and regulations and policies of the sector.
    Keywords: Facturación Fraudulenta, Café, Aceite de Palma, Flujos Financieros, Corrupción, Exportaciones, Actividades Ilegales, Lavado de Activos, Fraudulent Billing, Coffee, Palm Oil, Financial Flows, Corruption, Exports, Illegal Activities, Money Laundering.
    JEL: F3 F30 F31 F32 F33 F34 F38 Q1 Q10 Q11 Q13 Q15 R1 R10 R11 R48
    Date: 2022–09–30

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