nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2023‒04‒24
eight papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Impact of COVID-19 shock on a segmented labour market: Analysis using a unique panel dataset By Das, Satadru; Ghosh, Saurabh; Mazumder, Debojyoti; Tushavera, Jitendra
  2. Digital divides among microsized firms: Evidence from Sub-Saharan Africa By Damien GIROLLET
  3. What has been driving work-to-work transitions in the emerging world? a comparative study of Indonesia and South Africa By Brehm, Johannes,; Doku, Angela,; Escudero, Verónica,
  4. Analysis attempt of the relationship between tax burden and taxpayer compliance : A literature review By Rida BELAHOUAOUI; El Houssain ATTAK
  5. The design and revenue impact of a tax receipts lottery: A lab experiment in Tanzania By Cyril Chimilila; Remidius Ruhinduka; Vincent Leyaro
  6. Limited Commitment, Social Control and Risk-Sharing Coalitions in Village Economies By Daniel J. Hernandez; Fernando Jaramillo; Hubert Kempf; Fabien Moizeau; Thomas Vendryes
  7. Poverty and socio-financial inclusion in Japan By Ciula, Raffaele
  8. Formalisation et accès au crédit des petites et moyennes entreprises : cas du Togo By KOTOKLO, Edoh; TOGBENU, Fo-kossi edem

  1. By: Das, Satadru; Ghosh, Saurabh; Mazumder, Debojyoti; Tushavera, Jitendra
    Abstract: This paper studies the impact of economic crisis caused by the COVID on the Indian labour market using the Periodic Labour Force Survey (PLFS). The unique dataset offers the opportunity to analyse sectoral transition and mobility of workers in response to a crisis due to its rotational panel framework. We employ transition matrices, non-parametric cumulative distribution functions, and machine learning techniques to identify the impact of COVID shock on formal and informal sector workers and whether this impact was heterogeneous. We find that labour market outcomes, both in terms of employment status and income, became even more divergent between the formal and informal sectors during the first wave of pandemic and remained divergent in the recovery phase. The classification analysis highlights that the sector in which the worker was employed (formal or informal sector), was an important predictor of income loss during the first wave.
    Keywords: Segmented Labour Market, Informality, COVID scarring.
    JEL: J31 J46 J62
    Date: 2023–03
  2. By: Damien GIROLLET
    Abstract: TThis paper explores digital inequalities in access and usage among 3, 300 firms and entrepreneurs from eight sub-Saharan African countries. To account for informal firms’ heterogeneity, we identify three segments: an upper tier of top performers, a lower tier of survivalists, and an intermediate segment composed of constrained gazelles. Although digital technologies are already used by most of the informal entrepreneurs in Sub-Saharan Africa, our findings suggest that the diffusion of these new technologies is uneven across informal firms, digital inequalities being rooted in the already existing socioeconomic inequalities. Indeed, digital inequalities align with the hierarchy of informal sectors in each country and are associated with entrepreneurs’ and firms’ characteristics. Using multivariate analysis, we find that gender and rural/urban digital divides persist in the productive sphere. At the same time, firms with a high level of informality, low profits, precarious operating conditions, and no access to financial services are less likely to use digital technologies.
    Keywords: Digital technology, ICT, digital divide, informality, Africa.
    JEL: D22 O17 O33 O55
    Date: 2023
  3. By: Brehm, Johannes,; Doku, Angela,; Escudero, Verónica,
    Abstract: This paper examines these elements in the context of South Africa and Indonesia– two middle-income countries with similar development levels yet different labour market characteristics. We employ a comparative cross-country methodology using long-term panel data.
    Keywords: informal employment, economic sector, rural employment, youth employment, occupational qualification
    Date: 2023
  4. By: Rida BELAHOUAOUI (UCA - Université Cadi Ayyad [Marrakech]); El Houssain ATTAK (UCA - Université Cadi Ayyad [Marrakech])
    Abstract: Tax revenue mobilization remains one of the most pressing issues, especially for developing countries, as it is an important driver for the achievement of sustainable development goals. Consequently, developing countries, whose main source of financing is tax revenue, are constantly seeking to increase the level of these resources, leading to an increase in the tax burden that affects taxpayers' behavior. The objective of this article is to analyze the relationship between tax burden and taxpayer compliance through a review of the theoretical literature. Indeed, the consequences of the tax burden on taxpayers' compliance have been the subject of much research since the 14th century. According to most economists, the tax burden has a negative impact on taxpayer compliance. Ibn Khaldun showed that an ever-increasing tax burden has a direct and negative impact on taxpayers' compliance. For his part, Laffer illustrated that, due to the rational expectations of economic agents, any increase in the tax rate beyond the optimal level reduces taxpayer compliance. According to the comparative treatment model, the tax compliance rate decreases when a taxpayer perceives that his tax burden is higher than that of other taxpayers in the same group. The results of this review of the theoretical literature confirm that the tax burden is related to taxpayer compliance, so that there is a level of tax burden above which taxpayers develop tax evasion behavior.
    Abstract: La mobilisation des recettes fiscales reste l'une des questions les plus pressantes, surtout pour les pays en développement, car elle constitue un moteur important pour la réalisation des objectifs de développement durable. Par conséquent, les pays en développement, dont les recettes fiscales constituent la principale source de financement, cherchent constamment à accroître le niveau de ces ressources, ce qui entraîne une augmentation de la pression fiscale qui affecte le comportement des contribuables. L'objectif de cet article est d'analyser la relation entre la pression fiscale et la conformité des contribuables à travers une revue de la littérature théorique. En effet, les conséquences de la pression fiscale sur la conformité des contribuables ont fait l'objet de nombreuses recherches depuis le 14ème siècle. Selon la plupart des économistes, la pression fiscale a un impact négatif sur la conformité des contribuables. Ibn Khaldoun a montré qu'une pression fiscale toujours plus lourde a un impact direct et négatif sur le respect des règles par les contribuables. Pour sa part, Laffer a illustré que, en raison des anticipations rationnelles des agents économiques, toute augmentation du taux d'imposition au-delà du niveau optimal réduit la conformité des contribuables. Selon le modèle du traitement comparatif, le taux de conformité fiscale diminue lorsqu'un contribuable perçoit que sa pression fiscale est plus élevée que celle des autres contribuables du même groupe. Les résultats de cette revue de la littérature théorique confirment que la pression fiscale est liée à la conformité des contribuables, de sorte qu'il existe un niveau de pression fiscale au-delà duquel les contribuables développent un comportement d'évasion fiscale.
    Keywords: Tax burden, Tax compliance, Taxpayers, Determinants., Pression fiscale, Conformité fiscale, Contribuables, Déterminants.
    Date: 2022–03–31
  5. By: Cyril Chimilila; Remidius Ruhinduka; Vincent Leyaro
    Abstract: Most sub-Saharan African countries are characterized by low tax compliance and low tax productivity. This study tests the effects of a tax lottery under alternative reward designs on compliance as an alternative policy option for addressing the problem of low tax receipts in Tanzania. The lab experiment involved the purchase of goods with a sample of 313 undergraduate students recruited from courses with and without tax specialization. The experiment participants were randomly assigned in control and treatment groups and thereafter assigned random endowment incomes. In the treatment groups two treatments were administered: a lottery of high probability and low rewards, and a lottery of low probability and high rewards, where eligibility for the lottery was restricted to those who paid VAT on the purchase (which would be cheaper otherwise). The results of the experiment revealed a lottery of high reward has a higher impact on compliance and revenue. Our estimates show that the net revenue effects of these lotteries differ by 27 percent. Hence, the design of a tax lottery is important. Further, tax lotteries have the potential to improve taxpayer compliance and increasing revenue collection.
    Keywords: VAT compliance, tax lottery experiment, rewards design, Tanzania
    Date: 2023
  6. By: Daniel J. Hernandez (Université Paris Saclay, Ecole Normale Supérieure Paris-Saclay, CEPS); Fernando Jaramillo (Universidad del Rosario, Bogota, Colombia); Hubert Kempf (Université Paris Saclay, Ecole Normale Supérieure Paris-Saclay, CEPS); Fabien Moizeau (Université de Rennes, CNRS, CREM-UMR6211, F-35000 Rennes, France); Thomas Vendryes (Université Paris Saclay, Ecole Normale Supérieure Paris-Saclay, CEPS)
    Abstract: The need to insure against idiosyncratic income risk leads to the formation of risksharing groups in village economies where formal financial markets are absent. We develop a theoretical model to address the impact of limited commitment and social control on the extent of informal risk sharing when agents are induced to form such risk-sharing coalitions. Social control increases the prospect of future punishment of present defectors and thus mitigates the absence of commitment. A defection-proof core-partition exists, is unique and homophilic. Riskier societies may not be more segmented and may not pay a higher cost for insurance. A higher social control leads to a less segmented society but does not necessarily lead to a lower price for sharing risk. We provide evidence, based on data on Thai villages, that consumption smoothing conforms with our theoretical result of homophily-based coalitions and that social control contributes to a lesser segmentation of a society.
    Keywords: Risk Sharing, Informal Insurance, Group Formation, Social Control, Risk Heterogeneity, Homophily, Dyadic Models, Thailand
    JEL: C71 D81 O12 O17
    Date: 2023–03
  7. By: Ciula, Raffaele
    Abstract: Poverty has always been a sensitive issue in Japan, in fact the first official statistics on this phenomenon have been released late in time compared to many developed countries. Similarly, the most important Japanese public assistance scheme is quite narrow, stigmatizing and discretionary, which suggests a cautious attitude towards poverty and the poor. In this regard, the scholars have pointed out some factors associated with poverty, such as income, employment, and education, but the association between financial characteristics of Japanese people and poverty is still under-researched. As financial inclsion has always been an important feature in Japan, and can be an important driver of poverty avoidance, the goal of this article is about inspecting the role of formal and informal financial instruments, including the ability to save, in reducing the likelihood of falling into poverty. Also, it analyzes the role of financial access in decreasing the detrioration of being well-off in Japan, using the World Bank dataset, and employing a logit regression analysis. The main findings of this article show that formal financial instruments, the savings capacity, and tertiary education are important drivers of reducing the probability of falling into poverty. Similarly, education, and financial instruments play a pivotal role in avoiding the movement from being well-off to becoming middle-class in Japan. Therefore, this article suggests that savings, the education system, and financial instruments are still a buffer against poverty in Japan. Further, it points out that probably public interventions which encourage financial inclusion should be strengthened.
    Keywords: Poverty; Savings; Financial Determinants, Education; Capabilities
    JEL: D60
    Date: 2023–03–16
  8. By: KOTOKLO, Edoh; TOGBENU, Fo-kossi edem
    Abstract: The purpose of this paper is to analyze the effect of formalization on access to credit by taking the example of Togolese (small and medium) enterprises. To achieve this objective, we test the hypothesis that the formalization of firms has a significant effect on access to credit. To do so, a Probit regression and the special regressor method were used on data from 65, 725 firms extracted from the 2019 General Census of Enterprises database piloted by the Institut Nationale de la Statistique et des Etudes Economiques et Démographiques (INSEED). The results show that the variable "Formalization of enterprises (small and medium)" has a significant influence at the 1% level on the probability of access to credit. In addition, the control variables such as guarantees, cost of credit, access to the public market, gender and level of education also explain access to credit at the 1%, 1%, 5% and 10% thresholds respectively. Our results show the importance of training and capacity building for informal enterprises to formalize. Also, they will allow regulatory bodies to develop policies that can reframe the informal sector in order to contribute to the GDP and absorb more young people seeking employment.
    Keywords: Keywords: Formalization, SMEs, Access to Credit, Probit and Special Regressor
    JEL: D22
    Date: 2023–03–17

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