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on Informal and Underground Economics |
| By: | Daniel Guzmán |
| Abstract: | Using Colombian Household Survey (GEIH) data and Schmieder and von Wachter (2010) methodology, which builds upon Beaudry and DiNardo (1991) empirical approach, I found that informal workers obtain proportionally higher wage gains than formal workers when the labour market is tight. In turn, these wage premia are persistent in the informal sector, unlike the formal one. While these wage gains appear to increase around 20% the probability of layoffs when compared to the unconditional means across both sectors, the absolute increase for informal workers can be up to six-fold larger relative to their formal counterparts. The absence of regulation and employee benefits -such as written contracts, severance payments and social insurance-seems to have an amplifying effect on the informal workers’ bargaining power during the most favourable periods of the labour market. |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:chb:bcchwp:1012 |
| By: | Cruces, Guillermo (CEDLAS-UNLP); Tortarolo, Dario (World Bank); Vazquez-Bare, Gonzalo (UC Santa Barbara) |
| Abstract: | We develop a framework to analyze partial population experiments, a generalization of the cluster experimental design where clusters are assigned to different treatment intensities. Our framework allows for heterogeneity in cluster sizes and outcome distributions. We study the large-sample behavior of OLS estimators and cluster-robust variance estimators and show that (i) ignoring cluster heterogeneity may result in severely underpowered experiments and (ii) the cluster-robust variance estimator may be upward-biased when clusters are heterogeneous. We derive formulas for power, minimum detectable effects, and optimal cluster assignment probabilities. All our results apply to cluster experiments, a particular case of our framework. We set up a potential outcomes framework to interpret the OLS estimands as causal effects. We implement our methods in a large-scale experiment to estimate the direct and spillover effects of a communication campaign on property tax compliance. We find an increase in tax compliance among individuals directly targeted with our mailing, as well as compliance spillovers on untreated individuals in clusters with a high proportion of treated taxpayers. |
| Keywords: | partial population experiments, spillovers, randomized controlled trials, cluster experiments, two-stage designs, property tax, tax compliance |
| JEL: | C01 C93 H71 H71 H26 H26 H21 H21 O23 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17256 |
| By: | Bargain, Olivier; Jara, H. Xavier; Rivera, David |
| Abstract: | To finance increased public spending and social programs, Latin America's tax systems need to develop further. Yet taxation can reduce the tax base by discouraging formal employment. Evidence on the intensity of the problem is limited and tends to focus on specifically large reforms of the tax system. Conversely, and to improve external validity, we study whether routine changes in tax policies also alter labor market formalization. Our approach is based on grouped-data estimations of formal employment responses to policy changes. We exploit tax variation across three countries (Bolivia, Ecuador and Colombia) and three periods (2008, 2014/15, 2019). We use precise calculations of counterfactual tax burdens when moving from informal to formal jobs, i.e. formalization tax rates (FTRs). For most countries and pairs of years, FTRs have a negative and significant effect on formal employment, particularly when wages are held constant across periods – in order to extract the pure policy effect – and in a series of sensitivity checks. |
| Keywords: | taxation; benefits; labor supply; informality |
| JEL: | H24 H31 J24 J40 |
| Date: | 2024–09–09 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:125368 |
| By: | Berlinski, Samuel; Gagete-Miranda, Jessica |
| Abstract: | This study examines labor law enforcement spillovers in Brazil's highly informal economy, focusing on disability quota enforcement for formal firms. New inspection procedures increased compliance through heightened inspections and fines, boosting disability hiring. We investigate spillover effects across various firm networks: neighborhood, ownership, and human resources specialists. Results show that spillovers can have up to twice the impact on disability employment compared to direct fines. These findings highlight the potential for targeted enforcement strategies to amplify policy effectiveness beyond directly affected firms even in developing economies characterized by low compliance with employment laws. |
| Keywords: | Enforcement spillovers;Networks;persons with disability;Brazil |
| JEL: | I38 J68 K31 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:13681 |
| By: | Campos, Nicolás (Inter-American Development Bank); Chalup, Miguel (Arizona State University); Mitnik, Oscar A. (Inter-American Development Bank); Urquidi, Manuel (Inter-American Development Bank) |
| Abstract: | We provide quasi-experimental estimates of the impact of reforming public training programs offered in Paraguay on formal employment. The Programa de Apoyo a la Inserción Laboral (PAIL) revamped training program design in the country by offering courses aligned with the needs of the private sector, enhancing non-cognitive skills, and combining practical work within companies with classroom training. We combine administrative records—which contain detailed information on the employment history and characteristics of all formal workers in Paraguay—with an empirical strategy based on extensions of difference-in-differences models and synthetic difference-in-differences. We find that the probability of obtaining formal employment for women and men increases by 11 percentage points. Even two years after participating, the program has a lasting impact on women, an aspect not observed for men. Additionally, the program's impact is positive only in the metropolitan area of Asunción; the program is less effective in areas far from the urban center, especially for men. The observed results suggest that supply-side interventions are ineffective if no formal jobs are available for the beneficiaries. |
| Keywords: | public training programs, active labor market policies, formal employment |
| JEL: | J24 J38 J68 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17254 |