nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2023‒05‒29
four papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Tax policies, informality, and real wage rigidities By Andres García-Suaza; Fernando Jaramillo; Marlon Salazar
  2. Socioemotional Wealth and Product Differentiation in the Informal Economy: A Simple Theroetical Model By Augendra Bhukuth; Damien Bazin; Abir Khribich
  3. The impact of Covid-19 on South African migrant wage workers and the self-employed By Visser, Margareet,
  4. The new fiscal sociology: a study of universal self-Assessment taxpayers in Bangladesh By Kazi Abdul, Mannan; Khandaker Mursheda, Farhana

  1. By: Andres García-Suaza; Fernando Jaramillo; Marlon Salazar
    Abstract: Developing countries have a vast informal sector generally associated with low productivity levels. The response of informal employment to tax policies might depend on labor market rigidities. This paper proposes a theoretical framework consisting of a search and matching model with segmentation in the labor market to understand how tax policies and enforcement interact to determine the size of the formal sector. The analytical results show that decreasing payroll taxes increases formal employment demand, and enforcement expenditure decreases informal employment offers. The model suggests that a tax policy combination leads to a significant impact on informality reduction. Moreover, the magnitude of the effect of tax policies depends on real wage rigidities, i.e., when the economy faces high real wage rigidities, the tax policies have a higher effect on informality reduction
    Keywords: Informality, payroll taxes, fiscal policy, enforcement, search frictions, shirking, developing countries.
    JEL: E26 E62 J21 J46 J31 O17 K42
    Date: 2023–04–28
  2. By: Augendra Bhukuth (Ieseg Management School, France); Damien Bazin (Université Côte d'Azur; GREDEG CNRS); Abir Khribich (Université Côte d'Azur, CNRS, GREDEG, France; Faculty of Economic Sciences and Management of Nabeul, University of Carthage, Tunisia; LEGI, Tunisia Polytechnic School)
    Abstract: In this article we develop a simple product differential model in which the input, socioemotional wealth, takes the form of knowledge sharing between employees. Competition in the informal economay depends on product differentiation, and our model shows that when micro family enterprises in the informal economy rely on family workers to differentiate their products from those of their competitors, they increase their productivity, remain competitive, and sustain their activities in a highly competitive market. Micro family enterprises reward the loyalty of family workers by providing them with social benefits, whereas the wage depends on the knowledge shared between workers.
    Keywords: informal economy, know-how (savoir-faire), micro-small enterprises, product differentiation, SEW
    JEL: D21 D29 L21 L23 L25
    Date: 2022–03
  3. By: Visser, Margareet,
    Abstract: When Covid-19 struck the South African government declared some of the strictest lockdowns worldwide. The impact of lockdowns on the working classes was especially severe. Initially many workers were left with no income, leading to warnings that a pandemic of hunger may eclipse the deadliness of the Covid-19 pandemic. Classified as essential workers, farm workers were “lucky enough” to continue working and earning an income. Yet, this paper highlights how Covid-19 regulations exacerbated their vulnerability due to a pre-existing lack of public regulation and enforcement of basic labour and transport regulation in the sector. Apart from farm workers, the paper also discusses how informal workers – in this case taxi drivers – tried to leverage the pandemic to push for closer integration into the agricultural sector to create more sustainable livelihoods for themselves.
    Keywords: COVID-19, migrant workers, wages., self employed
    Date: 2023
  4. By: Kazi Abdul, Mannan; Khandaker Mursheda, Farhana
    Abstract: Economists and sociologists recognize taxation as an important element of the life of individuals. As the tax system and policies of each country reflect the characteristics of the country's social, political, cultural and economic structure, tax systems differ according to the characteristics of the structure of the society. The study is aimed to investigate the ethical, moral, religious, gender, educational and cultural background considerations on individual voluntary tax compliance whose main income is from business, salaries and other sources. This is a cross-sectional quantitative study. The survey was conducted on 385 respondents’ individual taxpayers within the capital city of Dhaka in 2020. Necessary statistical tests including multiple regression analysis were used in this study. Findings show that ethicality and educational background have a direct significant effect on the individual tax compliance among the taxpayers whose main income is from business, salaries and other sources. However, gender, religious, morality and cultural background do not have significant effect in this relationship. It is believed this study will significantly contribute to the body of knowledge in the areas of voluntary tax compliance.
    Keywords: Taxation, Self-assessment, Compliance, Ethics, Moral, Religion, Education, Culture
    JEL: E6 E60 E62 E63 E69
    Date: 2023

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