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on Informal and Underground Economics |
| By: | Rafael Dix-Carneiro (Duke University); Pinelopi Koujianou Goldberg (Yale University); Costas Meghir (Yale University); Gabriel Ulyssea (University College London) |
| Abstract: | We examine the effects of international trade in the presence of a set of domestic distortions giving rise to informality, a prevalent phenomenon in developing countries. In our quantitative model, the informal sector arises from burdensome taxes and regulations that are imperfectly enforced by the government. Consequently, smaller, less productive firms face fewer distortions than larger, more productive ones, potentially leading to substantial misallocation. We show that in settings with a large informal sector, the gains from trade are significantly amplified, as reductions in trade barriers imply a reallocation of resources from initially less distorted to more distorted firms. We confirm findings from earlier reduced-form studies that the informal sector mitigates the impact of negative labor demand shocks on unemployment. Nonetheless, the informal sector can exacerbate the adverse welfare effects of economic downturns, amplifying misallocation. Last, our research sheds light on the relationship between trade openness and cross-firm wage inequality. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2384&r=iue |
| By: | Francesco Amodio (McGill University); Emanuele Brancati (Sapienza University); Peter Brummond (University of Alabama); Nicolas de Roux (Universidad de Los Andes, Colombia); Michele Di Maio (Sapienza University) |
| Abstract: | We estimate the labor market power of over 13, 000 manufacturing establishments across 82 low and middle-income countries around the world. Within local labor markets, larger and more productive firms have higher wage markdowns and pay lower wages. Labor market power across countries exhibits a mild non-linear relationship with GDP per capita, entirely driven by a strong hump-shaped relationship with the share of self-employed workers. Labor market institutions fully account for the hump shape: in countries with unemployment protection, wage markdowns increase with the share of self-employment while the opposite is true in countries without it. We explain this finding through the lens of a simple oligopsonistic labor market model with frictions. Self-employment prevalence correlates with the elasticity of labor supply to the wage paid, and labor market institutions can change the sign of this relationship. |
| Keywords: | labor market power, self-employment, development, labor market institutions |
| JEL: | J20 J30 J42 L11 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:crm:wpaper:2404&r=iue |
| By: | Coates, Dermot; Lawless, Martina |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp772&r=iue |
| By: | Fernández, Cristina (FEDESARROLLO); Suecún, Cecilia (FEDESARROLLO) |
| Abstract: | This study explores the potential impact of automation on jobs in Colombia, with a specific focus on the informal economy. To do this, we apply Frey and Osborne (2017) and IADB (2019) automation probabilities and Mihaylov and Tijdens (2019) routine task intensities to the Colombian context. We estimate that machines could replace around 57% of Colombian jobs within the next 10 to 20 years. We find that the percentage of high-risk occupations for informal workers is slightly higher than for formal workers, but the risk is slightly lower for workers in informal firms compared to those in formal firms. The results also highlight divergent findings depending on the methodology used, with some indicating that informal workers hold more automatable jobs, while others suggest the opposite. Younger workers and women are identified as groups facing a higher risk of automation, emphasizing the need for targeted attention to these demographics in the future. |
| Keywords: | Automation; Technological Change; Occupational Choice Routine and non-Routine Tasks; Job Loss |
| JEL: | E24 J23 J24 O33 |
| Date: | 2023–06–11 |
| URL: | http://d.repec.org/n?u=RePEc:col:000124:021023&r=iue |
| By: | Bogdan Virjan (Titu Maiorescu University of Bucharest, Bucharest, Romania) |
| Abstract: | In Article 10 (11) from Law no. 241/2005 for the prevention and combating of tax evasion, a clause of non-punishment is regulated, which becomes incident if the damage caused by the commission of one of the acts provided by Article 61, 8 or 9 of this law does not exceed the value of 100, 000 Euros, in the equivalent of the national currency, and this damage, increased by 20% of the calculation basis, to which interest and penalties are added, is fully covered during the criminal investigation or during the trial until a final ruling is rendered. In Article 10 (12), this normative act also states that the provisions governing this clause of non-punishment apply to all defendants even if they did not contribute to covering the damages. In view of these provisions, the High Court of Cassation and Justice - the judicial panel for the settlement of legal issues in criminal matters was seized in order to issue a ruling by which the question of law would be resolved, consisting in the question of whether the provisions of Article 10 (11) of Law no. 241/2005 are applicable in the case of covering the damage as a result of an involuntary activity, respectively a foreclosure procedure. By Decision no. 39/2003, The High Court of Cassation and Justice - the judicial panel for the settlement of legal issues in criminal matters rejected as inadmissible the seizure made in order to issue a preliminary ruling for the resolution of the legal issue under analysis, considering that the admissibility conditions stipulated by the Code of Criminal Procedure were not met in the case that generated the seizure, because it is not allowed to resort to this legal means in order to receive from the supreme court the concrete resolution of the case and the question that was the object of the seizure referred to a form of Article 10 (11) prior to the current form, which did not condition the incidence of this case of non-punishment by the maximum amount of the damage caused, of 100, 000 Euros, a form that was not applicable to the case in which the seizure was made and therefore the dismissal by law did not lead to the resolution of the case. Considering that the problem with which the Supreme Court was seized was not resolved as a result of the rejection of the seizure as inadmissible, in this article we proposed to conduct an analysis; on how the provisions of Article 10 (11) and (12) of Law no. 241/2005 should be interpreted and applied in the situation where the damage caused by the offense is covered by a third party or as a result of an involuntary activity, such as in the case of a foreclosure procedure. |
| Keywords: | clause of non-punishment, damages, tax evasion, real circumstance, foreclosure |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:smo:raiswp:0350&r=iue |
| By: | Doina Muresan (Dimitrie Cantemir Christian University, Bucharest, Romania) |
| Abstract: | The use of technology has steadily increased over the years, however, there is wide variation between people of different ages, with skills higher among younger “digital natives†and lower among older people. The daily use of the Internet among the Romanian population has increased considerably since 2014, proving the increase in the population’s comfort and confidence in using digital technologies and the Internet. Unsurprisingly, the level of digitization among businesses and individuals in Romania differs between regions. The level of digitization is higher in cities than in rural areas and the highest rate is, as expected, in Bucharest, Cluj and the North of the country. Reducing the knowledge and capacity gap between the country's areas can be done through a digitalization plan for the economy, similar to those published by the governments of many other countries, and through the digitalization of the interaction between SMEs and government institutions. The Romanian government is currently going through a significant process of digitizing both its own internal operations and the way it interacts with people and the business environment, for example through electronic signatures and the online takeover of tax-related matters. However, the constraints on government institutions derived from the lack of information determine opportunities for tax avoidance and evasion and inevitably favor compromise. Digitization can help alleviate these constraints in two ways: by implementing more accurate methods to verify the true economic results of taxpayers by connecting information existing in different parts of the tax system or by implementing more sophisticated tax systems. |
| Keywords: | advanced technologies, digitization, data storage, communication networks, taxes |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:smo:raiswp:0322&r=iue |
| By: | Juliana Londoño-Vélez; Javier Avila-Mahecha |
| Abstract: | We study behavioral responses to personal wealth taxes in Colombia. We utilize tax microdata from 1993 to 2016 linked with the leaked Panama Papers to investigate offshoring to the country’s key tax havens. We leverage variation from discrete jumps in tax liability and four major reforms to the wealth tax system, including changes in tax rates and duration, using bunching and difference-in-difference techniques. We find compelling evidence that taxpayers instantly reduce the wealth they declare in response to a wealth tax. Moreover, these effects can persist for years even after the wealth tax is no longer in place, providing the first evidence of a hysteresis effect for a temporary tax policy. The response is driven by misreporting items that authorities cannot cross-verify, such as overstating debt and understating non-third-party-reported business assets. Additionally, the wealthiest taxpayers respond to wealth tax increases by hiding assets in hard-to-track entities in tax havens. |
| JEL: | H24 H26 O23 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32134&r=iue |
| By: | Yimam, Seid; Lidetu, Kebede; Belete, Tihtina |
| Abstract: | In the last decade, tax administrations in developing countries have been introducing technological innovations such as e-filing and e-payment platforms. The main aim of introducing these technologies is to improve tax compliance and boost revenue collection by increasing convenience and flexibility for taxpayers and reducing their compliance costs. E-filing and e-payment could save taxpayers time preparing and returning taxes and reduce errors and opportunities for corruption. However, the adoption of these technologies and their effectiveness in improving tax compliance could be undermined by several factors. Using tax administrative records, we examined the adoption rate trend of the e-filing system and the correlation between e-filing adoption and tax compliance of large and medium taxpayers in Ethiopia. The timeliness of value-added tax (VAT) and corporate income tax (CIT) return filing and the amount of tax declared are the two main compliance indicators used in this study. Furthermore, we explored the existing challenges and the way forward to improve the adoption of the e-tax system using focus group discussions (FGDs). |
| Keywords: | Economic Development, |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:idq:ictduk:18216&r=iue |
| By: | Derrick, Fossong; Mc Moi Ndi, Ashu; Santoro, Fabrizio |
| Abstract: | Many African countries have made significant progress in digitalising tax administration. Recent research has shown promising evidence around the impact of digital solutions, such as electronic filing, on tax compliance and revenue generation. Very little, however, is known about how digitalisation could strengthen local tax administration, and how subnational government levels could benefit from broader national digitalisation reforms. The case of Cameroon illustrates how local tax administrations can struggle to benefit from technology. The digital tax policy (DTP) was adopted in Cameroon in 2014 and went fully into effect in 2016. The reform introduced an online declaration and payment system, accessible through the web portal of the Directorate General of Taxes (DGT), the national tax administration. The reform also heavily focussed on pre-filling tax returns. With the information it has on taxpayers’ business activities, income and assets, the tax administration automatically issues a pre-filled tax return form. In turn, taxpayers, accessing the pre-filled form online, only have to confirm the information on it if they find it is accurate. If not, they have to amend the form online. Further, the web portal permits taxpayers to make their payments digitally, through a bank or electronically. Summary of African Tax Administration Paper 33. |
| Keywords: | Finance, Technology, |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:idq:ictduk:18233&r=iue |