nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2023‒04‒03
four papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Import Competition and Informal Employment: Empirical Evidence from China By Feicheng Wang; Zhe Liang; Hartmut Lehmann
  2. Going Green: Estimating the Potential of Green Jobs in Argentina By Manuela María Cerimelo; Pablo De la Vega; Natalia Porto
  3. Investigating Tax Compliance with Mixed-Methods Approach: The Effect of Normative Appeals Among the Firms in Latvia By Saulitis, Andris; Chapkovski, Philipp
  4. Republic of Slovenia: Technical Assistance Report-Revenue Administration Gap Analysis Program- Corporate Income Tax Gap By International Monetary Fund

  1. By: Feicheng Wang (University of Göttingen); Zhe Liang; Hartmut Lehmann
    Abstract: This paper investigates the effects of trade liberalisation induced labour demand shocks on informal employment in China. We employ a local labour market approach to construct a regional measure of exposure to import tariffs by exploiting initial differences in industrial composition across prefectural cities and then link it with the employment status of individuals. Using three waves of household survey data between 1995 and 2007, our results show that workers from regions that experienced a larger tariff cut were more likely to be employed informally. Further results based on firm-level data reveal a consistent pattern; tariff reductions increased the share of informal workers within firms. Such effects are more salient among smaller and less productive firms. Our findings suggest an important margin of labour market adjustment in response to trade shocks in developing countries, i.e. employment adjustment along the formal-informal dimension.
    Keywords: Trade liberalisation; Import competition; Informal employment; Firms; China
    JEL: F14 F16 F66 J46
    Date: 2021–09
  2. By: Manuela María Cerimelo; Pablo De la Vega; Natalia Porto
    Abstract: This paper aims to identify and characterize the potential of green jobs in Argentina, i.e., those that would benefit from a transition to a green economy, using occupational green potential scores calculated in US O*NET data. We apply the greenness scores to Argentine household survey data and estimate that 25% of workers are in green jobs, i.e., have a high green potential. However, when taking into account the informality dimension, we find that 15% of workers and 12% of wage earners are in formal green jobs. We then analyze the relationship between the greenness scores (with emphasis on the nexus with decent work) and various labor and demographic variables at the individual level. We find that for the full sample of workers the green potential is relatively greater for men, the elderly, those with very high qualifications, those in formal positions, and those in specific sectors such as construction, transportation, mining, and industry. These are the groups that are likely to be the most benefited by the greening of the Argentine economy. When we restrict the sample to wage earners, the green potential score is positively associated with informality.
    JEL: E20 Q50 J80
    Date: 2022–11
  3. By: Saulitis, Andris; Chapkovski, Philipp
    Abstract: This study employs a field experiment and qualitative content analysis to examine the effect of various behaviourally-informed messages on increasing tax compliance in Latvia. In a field experiment, more than 3, 000 businesses received a message with a normative appeal to increase the relatively low salaries compared to firms operating in the same industry and region. Other treatment groups received the same message with an additional paragraph that varied audit probabilities or included prosocial messages. All treatments effectively increased the average declared salaries in the enterprises relative to not sending a message. Even though the overall fiscal effect was positive, the qualitative analysis of the feedback by the firms indicates that messages, particularly those that did not state the future actions of the tax administration, provoked discontent and distrust between the taxpayer and the tax administration. Our findings demonstrate that clear communication of the intended actions of the tax administration is the most effective approach to promoting tax compliance. Furthermore, our research indicates that a relatively small audit probability (5%) is as effective as a larger probability (66%), implying that there is no need to carry out audits on a large scale to address tax evasion.
    Keywords: tax collection; shadow economy; prosocial behaviour; tax audits; mixed-methods
    JEL: C93 D03 H26 H32 H83
    Date: 2023–03–01
  4. By: International Monetary Fund
    Abstract: This report presents the estimates of tax gaps for corporate income tax (CIT) for non-financial corporations in Slovenia by applying the methodology of the IMF’s RA-GAP (Revenue Administration – Gap Analysis Program). This work is being undertaken under the context of the larger project designed to strengthen the administration of corporate income tax (CIT) by the Slovenian Financial Administration (SFA). Providing support towards building the capacity of the SFA to estimate and analyze the CIT gap will assist in achieving the overall goals of the project to: (i) strengthen core tax administration functions, and (ii) strengthen revenue administration, management, and governance arrangements.
    Date: 2023–03–10

This nep-iue issue is ©2023 by Catalina Granda Carvajal. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.