nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2023‒06‒19
four papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Pensions and informality in a structuralist dual-economy model By David Cano Ortiz
  2. Women's Transitions in the Labour Market as a Result of Childbearing: The Challenges of Formal Sector Employment in Indonesia By Cameron, Lisa A.; Contreras Suarez, Diana; Tseng, Yi-Ping
  3. Knockin' on H(e)aven's door. Financial crises and hidden wealth By Silvia Marchesi; Giovanna Marcolongo
  4. Leveraging Anti-money Laundering Measures to Improve Tax Compliance and Help Mobilize Domestic Revenues By Mr. Emmanuel Mathias; Adrian Wardzynski

  1. By: David Cano Ortiz
    Abstract: Although labor informality prevents half of the working age population in Latin America from contributing to pensions, old-age protection expanded in the last decades thanks to non-contributory social pensions. However, the lowlevels of coverage and benefits in these programs, and the persistently high levels of informality, cast doubt on the future of old-age protection in the region. The purpose of this paper is to assess whether universality and sufficiency of pensions can be achieved through non-contributory schemes, in countries with a large informal sector. For this, I build a theoretical dual-economy model with a formal and an informal sector, two generations, three pension schemes, and a three-fold social response to the old-age protection deficit: informal work by the unprotected old, income sharing by their families, and social pensions by the government. It is shown that with a demand-led formal sector the government can set targets of sufficiency and universality through social pensions. This guarantees to the old the right not to work and reduces the burden on their families
    Keywords: Informal employment, social pensions, pension systems, Latin America, structuralism, dualism, macroeconomic models.
    JEL: E11 H24 I38 J26 J46 O17
    Date: 2022–11
  2. By: Cameron, Lisa A. (University of Melbourne); Contreras Suarez, Diana (University of Melbourne); Tseng, Yi-Ping (Melbourne Institute of Applied Economic and Social Research)
    Abstract: Although it is well established that women's labour force participation drops markedly with marriage and childbearing, surprisingly little is known about women's labour market transitions, especially in developing countries. This paper uses the Indonesian Family Life Survey to track the employment histories of over 9, 000 women across a period of more than 20 years, observing them as they get married and have children. The data show that large numbers of Indonesian women drop out of the labour market as a result of marriage and childbearing. The difficulty of maintaining formal sector employment emerges as a key problem. Having worked in the formal sector prior to the birth of a first child reduces the probability of working in the year following the birth by 20 percentage points and reduces the probability of returning to the labour market thereafter by 3.6 percentage points. Further, to the extent that women do return to work, formal sector employment is associated with greater delays in returning - women are more likely to return to work in the formal sector only once their child starts primary school, while in the informal sector they return earlier. We find little evidence of women switching from the formal to the informal sector. Formal sector labour market policies such as flexible work hours; compressed work weeks; part-time work (with the same career opportunities and benefits as full-time work); the ability to work from home; and work-based childcare are likely to boost women's labour force participation, with consequent boosts to economic productivity and prosperity.
    Keywords: female labour force participation, labour market transitions, economic development, childbearing
    JEL: J20 J16 O15
    Date: 2023–05
  3. By: Silvia Marchesi; Giovanna Marcolongo
    Abstract: This paper investigates the link between financial crises in developing countries and variation of bank deposits in offshore financial centers. Using both a two way fixed effects and a stacked difference-in-differences estimator, we find that after three years since the beginning of the crisis bank deposits in tax havens increase by about 20 percent. The effect does not depend on taxation and seems driven by countries with more fragile institutions. We add to the literature on the effects of tax havens: they not only facilitate tax evasion and corruption in "normal times", but also absorb resources during financial crises, when most needed.
    Keywords: Sovereign debt crisis, Financial Crisis, Offshore accounts.
    JEL: D73 F34 G15 H63 P16
    Date: 2023–04
  4. By: Mr. Emmanuel Mathias; Adrian Wardzynski
    Abstract: The paper advocates leveraging anti-money laundering (AML) measures to enhance tax compliance, tackle tax crimes, and, in turn, help mobilize domestic revenues. While AML measures have already been deployed to improve tax compliance, including during the European debt crisis, the benefits that such measures could bring to the integrity of the tax system are yet to be fully realized. In recent years, the relevance of AML measures for tax purposes resurfaced in public discourse in light of numerous data leaks that provided ample evidence of the closely intertwined nature of tax crimes and money laundering. There might now be the right political momentum for greater utilization of AML measures given post-pandemic calls for a more progressive tax system, elevated sovereign debt burdens, a challenging global economic outlook, and widespread cost-of-living crisis. In this context, the IMF has stressed the importance of rebuilding fiscal buffers, as countries with more fiscal room are better placed to weather the economic slowdown and protect households and businesses.
    Keywords: Tax crimes; Anti-money laundering; Predicate offenses; AML measure; tax purpose; AML enforcement; tax cooperation; tax criminal; Anti-money laundering and combating the financing of terrorism (AML/CFT); Money laundering; Tax return filing compliance; Tax evasion; Global
    Date: 2023–04–21

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