nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2023‒11‒20
five papers chosen by
Catalina Granda Carvajal, Banco de la República

  1. Roads, Competition, and the Informal Sector. By Elena Perra,; Sanfilippo, Marco; Sundaram, Asha
  2. Corporate Income Tax Gap Estimation by using Bottom-Up Techniques in Selected Countries: Revenue Administration Gap Analysis Program By Patricio A Barra; Mr. Eric Hutton; Polina Prokof'yeva
  3. Catch me if you can : Gaps in the Register of Overseas Entities By Advani, Arun; Poux, Cesar; Powell-Smith, Anna; Summers, Andy
  4. Public disclosure and tax compliance: evidence from Uganda By Priya Manwaring; Tanner Regan
  5. The gradient of legal title in the housing market of China: a vertical dimension By Guangyu Cheng

  1. By: Elena Perra,; Sanfilippo, Marco; Sundaram, Asha (University of Turin)
    Abstract: We examine the impact of competition from better connectivity to domestic markets on formal and informal firms. Combining geolocalized information on road improvements under a large infrastructure investment programme with data on manufacturing firms in Ethiopia, we show that an increase in competition is associated with higher labour productivity, capital-intensity, investment in physical capital and wages in the formal sector. On the contrary, there is no associated increase in labour productivity or wages in the informal sector. In fact, increased competition results in lower capital-intensity and investment, a shift in composition towards workers without primary education and a lower likelihood of operating in the informal sector. We thus highlight that the benefits of infrastructure improvement programmes may not accrue uniformly in the economy.
    Date: 2022–12
  2. By: Patricio A Barra; Mr. Eric Hutton; Polina Prokof'yeva
    Abstract: This technical note describes bottom-up CIT gap estimation techniques applied by revenue administrations in the following highly experienced countries in this approach: Australia, Brazil, Canada, Denmark, Sweden, the United Kingdom, and the United States. The main topics included in the descriptions are techniques applied, CIT gap results, advantages and disadvantages of different available options, and future developments and recommendations for any revenue administration interested in starting bottom-up CIT gap estimation programs having no prior experience.
    Keywords: Tax Administration; Tax Compliance; Corporate Income Tax; Tax Gap; Tax Evasion; Random Audit Program; Risk-Based Audits
    Date: 2023–10–31
  3. By: Advani, Arun (University of Warwick Economics, CAGE, IFS, III); Poux, Cesar (2LSE International Inequalities Institute (III)); Powell-Smith, Anna (Visiting Fellow, LSE III; Director, Centre for Public Data); Summers, Andy (Associate Professor, LSE Law, III, IFS)
    Abstract: The Register of Overseas Entities (ROE) was introduced by the government in Spring 2022 with the commitment that it would require anonymous foreign owners of UK property to reveal their real identities. We use data released by Companies House and HM Land Registry to assess to what extent the ROE is currently delivering on this aim. We identify and quantify several major gaps in the scope and operation of the register and make recommendations for how the register could be improved.
    Date: 2023
  4. By: Priya Manwaring; Tanner Regan
    Abstract: Public disclosure policies have potential to raise tax compliance where alternative enforcement capacity is limited. We study the effects of reporting delinquents and recognizing compliers and provide evidence on the social determinants of tax compliance. Our results are consistent with a model in which being publicly known as tax-eligible is costly but social sanctions for delinquency are limited. Further, disseminating information on tax behavior reduces the compliance of recipients by causing their beliefs to be updated down toward the true compliance rate. Overall, these policies are limited at raising revenue and less effective than simple enforcement reminder nudges.
    Keywords: property tax, tax morale, public disclosure, shaming
    Date: 2023–07–21
  5. By: Guangyu Cheng
    Abstract: Legal title is a crucial instrument to secure the possession of assets and to enable the transfer of property in the formal market system. Without legal titles, property holders will be posed to a great threat of expropriation and eviction, and they will also feel hard to derive economic benefits from property exchanges because of restrictions from formal institutions. As pointed out by De Soto, a property without legal title is the dead capital rather than the asset that can accumulate wealth. Previous studies have assessed the market value attached to spatial distributions of dwellings in the absence of full legal titles by investigating the transaction of informal housings, because 'location' always matters in the real estate analysis. However, the concept of location not only refers to the geographical position at the horizontal dimension, but also involves other settings on the vertical dimension. Different vertical locations may bring different utilities for dwellers, leading to the variation of housing prices. Despite that, few attentions have been paid to the valuation of vertical location of properties when legal titles are absent. To fill this research gap, this study seeks to decipher how consumers value the vertical attributes of dwellings under the premise that de jure property rights are absent. The housing market in the urban fringe of China provides an ideal laboratory to conduct this investigation. Besides formal housings, a unique informal property named small property rights housing (SPRH) is also an important residential source for local people at the fringe of megacities. This type of informal housing is built on rural land collectively owned by villagers and then sold for urban residents without collective memberships. Like most formal residences in China, SPRHs are built in high-rise forms, and they can provide dwellers with spacious buildings, high-quality facilities and pleasant surroundings. In fact, it is hard to distinguish SPRH projects from other formal residential communities in terms of physical features. Despite the impressive built environments, SPRH still cannot be titled by governmental agencies. This is because that the development of SPRH fails to adhere to restrictions on collective-owned land use regulated by formal land systems. Due to the lack of legal titles, the transaction of SPRH is excluded from formal housing market of China, and it can only occur under the shadow. An empirical estimation is carried out with a dataset from an urban-fringe township named Chang’an where SPRH transactions are quite active. By comparing the difference in prices paid for formal housing units and SPRH units in the local housing market, this study finds that the selling price of SPRH unit at the local is significantly lower than that of formal housing unit with similar characteristics, all else being equal. More importantly, this study captured that the absence of legal titles can impact the value contribution of vertical attributes to the overall prices of housing units. Specifically, this study finds that: (i) the lack of full legal title can enhance the detrimental effect of building height on the selling price of housing unit; (ii) although high-rise residence has been the norm in urban China, dwellers still prefer to living in multi-storey buildings by paying price premiums, and this preference is stronger if the title of dwellings cannot be registered by formal authorities; and (iii) the deficiency in legal title status does not impact the valuation of consumers on the vertical position of housing units in the high-rise block. These findings reveal interesting interactions of property rights, housing attributes and housing prices from the vertical dimension. This research can shed new light on the understanding of market value of legal titles in a broader context.
    Keywords: Housing Price; Informality; Property Rights; Vertical Housing Attributes
    JEL: R3
    Date: 2023–01–01

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.