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on Informal and Underground Economics |
| By: | Manabu Nose; Mr. Nicola Pierri; Mr. Jiro Honda |
| Abstract: | This paper explores how digitalization in the corporate sector can boost tax revenue collection, . finding that stronger firm digitalization is associated with higher tax revenues across countries and also higher tax paid across firms. The cross-country estimates illustrate that a one-standard-deviation increase in firm digitalization is associated with an increase in tax revenues-to-GDP by up to 3 percentage points, conditional upon the level of digitalization of tax administration (GovTech). A firm-level analsis reveals that firm digitalization significantly improves tax compliance among high-risk taxpayers, such as small and informal enterprises, particularly in the service sector. This indicates that digitalization not only broadens the corporate tax base but also plays a crucial role in improving tax compliance. Moreover, both country and firm-level analyses reveal a significant synergy between firm digitalization and GovTech, undescoring the importance of promoting both to enhance tax collection. These analyses also suggest that, in developing countries, it is essential to create enabling environments for firm digitalization and GovTech and address any constraints to achieve their synergy effects. |
| Keywords: | Tax compliance; Public-Private digitalization; GovTech |
| Date: | 2025–05–09 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/089 |
| By: | Irene Di Marzio; Sauro Mocetti; Enrico Rubolino; Enrico Rubolino |
| Abstract: | This paper presents evidence of market externalities of tax evasion: firms' tax non-compliance distorts the outcomes of their competitors. Using novel administrative data on the universe of Italian firms, we compute a tax evasion proxy as the fraction of individual firms that manipulate their revenue to meet eligibility criteria for preferential tax regimes. Our empirical approach uses policy-induced changes in tax notches' size to predict the fraction of non-compliant firms in each market. We find that non-compliant firms lead to significant revenue and productivity losses for their competitors, who then pass on some of this burden to their workers. This unfair competition harms aggregate productivity, partly due to a worsening of allocative efficiency. Our findings show that cracking down on tax evasion not only increases tax revenue and promotes tax fairness, but can also enhance market efficiency by leveling the playing field. |
| Keywords: | tax evasion, market competition, preferential tax regimes |
| JEL: | H26 H25 D22 D43 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11896 |
| By: | Giles, John T. (World Bank); Joubert, Clement (World Bank); Tanaka, Tomoaki (Queen Mary University of London) |
| Abstract: | Low- and middle-income countries are aging rapidly but stagnation of growth in participation in pension programs, due to widespread informal employment, presents a major fiscal challenge. Some claim that improving the design of pension program rules can encourage more pension contributions, while others push for universal non-contributory pensions. This paper reviews the recent academic literature on the determinants of active participation in pension systems in high-informality settings. An emerging body of evidence shows that participation responds significantly to financial incentives as well as nonfinancial obstacles. At the same time, pensions are imperfect substitutes for other strategies to cover longevity risk, including support through the family, which will remain crucial for many older people in fiscally constrained environments. Therefore, policy makers should integrate the design of contributory pensions, social pensions, and policies that facilitate other forms of elderly support, and consider how all three interact. To inform such efforts, these interactions must be more systematically investigated and the empirical evidence must be expanded beyond a small number of middle-income countries. |
| Keywords: | informality, savings, retirement, pensions, LMICs |
| JEL: | H55 G51 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17886 |
| By: | Joubert, Clement (World Bank); Beegle, Kathleen (World Bank) |
| Abstract: | Although microenterprises are the most prevalent employer in Africa, boosting their productivity remains a development challenge. Theoretically, microenterprise business associations could foster technology, improve access to inputs, pool risk, ensure coordination, and facilitate credit for businesses. However, basic facts about their scope and roles are missing from the literature. This study establishes descriptive results to shed light on the nature of these networks in West Africa. First, fewer than 10 percent of informal business owners are members, although there is large industry variation. Second, members tend to be older and larger incumbent businesses with male owners, potentially stifling competition and entrenching gender gaps. Third, most associations are more aptly described as providers of excludable, industry-specific services than as vehicles for collective action and advocacy. Fourth, membership helps explain performance differences among observably similar businesses. Members are more productive, profitable, and financially included relative to similar non-members, although such premia only materialize in a few industries. |
| Keywords: | business associations, Africa, microenterprises, productivity |
| JEL: | D22 O16 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17887 |
| By: | Kohnert, Dirk |
| Abstract: | Since the 1990s, Ethiopian youths and adults—primarily from the country’s southern and central regions—have been migrating to South Africa via the "southern route." Over the past 25 years, this male-dominated migration flow has grown increasingly irregular, relying on human smugglers and multiple transit countries. The Ethiopian immigrant population in South Africa has expanded significantly, with shifts in the demographics of migrants, including age, ethnicity, place of origin, gender, and socioeconomic status. Rural youth have increasingly joined this migration stream, and more women are now migrating for marriage. Migration brokers play a pivotal role in facilitating irregular migration from Ethiopia to South Africa. Upon arrival, most Ethiopian immigrants engage in the informal economy and remain socially segregated, with language barriers hindering integration. The profile of migrants has diversified in recent years, now including teenagers, college graduates, and civil servants. Concurrently, the smuggling and settlement processes have evolved, particularly due to stricter border controls—exacerbated by factors such as the COVID-19 pandemic—which have altered smuggling dynamics and exacerbated inequalities among Ethiopian migrants in South Africa. Social networks sustain this migration trend, fuelled by narratives of financial success shared by early migrants through remittances, material goods sent back home, and social media. Labour market demands shape migrant profiles, with varying skill levels (low-skilled, unskilled, high-skilled) and gendered labour roles influencing migration patterns. Religion, particularly evangelical Christianity, also plays a significant role, framing migration as a divine blessing, shaping risk perceptions, and providing spiritual support in navigating the challenges of settlement. Aspirations for economic advancement and self-improvement drive many migrants, often leading them into precarious journeys facilitated by smuggling networks operating from Hosanna (the capital of Hadiya Zone) and Nairobi. Corruption among law enforcement agencies further enables this transnational smuggling industry. However, rising xenophobia in South Africa and stricter enforcement in transit countries like Kenya, Tanzania, and Malawi have reduced migration along this route since 2015. Unauthorized Ethiopian migrants in South Africa face stigmatization. They are, often being perceived as criminals, informal economy operators, or threats to local employment opportunities. This perception exacerbates their marginalization and limits their integration into South African society. |
| Keywords: | Human migration; Ethiopians; Sub-Saharan Africa; South Africa; informal economy; remittances; human smuggling; migration brokers; inequality; xenophobia; stigmatization; |
| JEL: | D14 D31 D62 D63 D74 D81 F22 F24 F61 J15 J23 J46 K37 N37 N87 O55 Z12 Z13 |
| Date: | 2025–06–02 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124926 |
| By: | Ioana Botea (World Bank); Markus Goldstein (Center for Global Development); Kenneth Houngbedji (DIAL, LEDa, CNRS, IRD, Universite Paris-Dauphine, Universite PSL); Florence Kondylis (World Bank); Michael O’Sullivan (World Bank); Harris Selod (World Bank) |
| Abstract: | In many parts of the world, women’s land rights remain informal, leaving widows—especially those without a male heir—at high risk of losing access to their land and homes when their husbands die. We study whether large-scale land formalization programs can improve widows’ tenure security, using data from a randomized controlled trial in rural Benin. Four years after the intervention, widows in villages with land formalization were significantly more likely to remain in their homes, with the strongest effects among those without a male heir. We identify two key mechanisms: increased community recognition of women’s land rights and greater decision-making power over land resources. These findings highlight the potential of land formalization to strengthen women’s tenure security and promote their long-term economic stability in similar settings. |
| Keywords: | property rights, land administration, gender, widowhood, intra-household insurance |
| JEL: | D23 I31 J12 J16 O17 |
| Date: | 2025–05–22 |
| URL: | https://d.repec.org/n?u=RePEc:cgd:wpaper:718 |
| By: | Kohnert, Dirk |
| Abstract: | Since the 1990s, Ethiopian youths and adults—primarily from the country’s southern and central regions—have been migrating to South Africa via the "southern route." Over the past 25 years, this male-dominated migration flow has grown increasingly irregular, relying on human smugglers and multiple transit countries. The Ethiopian immigrant population in South Africa has expanded significantly, with shifts in the demographics of migrants, including age, ethnicity, place of origin, gender, and socioeconomic status. Rural youth have increasingly joined this migration stream, and more women are now migrating for marriage. Migration brokers play a pivotal role in facilitating irregular migration from Ethiopia to South Africa. Upon arrival, most Ethiopian immigrants engage in the informal economy and remain socially segregated, with language barriers hindering integration. The profile of migrants has diversified in recent years, now including teenagers, college graduates, and civil servants. Concurrently, the smuggling and settlement processes have evolved, particularly due to stricter border controls—exacerbated by factors such as the COVID-19 pandemic—which have altered smuggling dynamics and exacerbated inequalities among Ethiopian migrants in South Africa. Social networks sustain this migration trend, fuelled by narratives of financial success shared by early migrants through remittances, material goods sent back home, and social media. Labour market demands shape migrant profiles, with varying skill levels (low-skilled, unskilled, high-skilled) and gendered labour roles influencing migration patterns. Religion, particularly evangelical Christianity, also plays a significant role, framing migration as a divine blessing, shaping risk perceptions, and providing spiritual support in navigating the challenges of settlement. Aspirations for economic advancement and self-improvement drive many migrants, often leading them into precarious journeys facilitated by smuggling networks operating from Hosanna (the capital of Hadiya Zone) and Nairobi. Corruption among law enforcement agencies further enables this transnational smuggling industry. However, rising xenophobia in South Africa and stricter enforcement in transit countries like Kenya, Tanzania, and Malawi have reduced migration along this route since 2015. Unauthorized Ethiopian migrants in South Africa face stigmatization. They are, often being perceived as criminals, informal economy operators, or threats to local employment opportunities. This perception exacerbates their marginalization and limits their integration into South African society. |
| Keywords: | Migration humaine; Éthiopiens; Afrique subsaharienne; Afrique du Sud; économie informelle; transferts de fonds; trafic d'êtres humains; courtiers en migration; pauvreté; inégalités; xénophobie; stigmatisation; |
| JEL: | D14 D31 D62 D63 D74 D81 F22 F24 F61 J15 J23 J46 K37 N37 N87 O55 Z12 Z13 |
| Date: | 2025–06–02 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124938 |
| By: | Pellegrini, Mariana |
| Abstract: | El avance de las plataformas digitales y las repercusiones del fenómeno sobre el trabajo en particular es una cuestión que ha capturado la atención de las ciencias sociales, planteando un debate que contrapone argumentos optimistas y críticos (Del Bono, 2019; Del Bono y Bulloni, 2021). Por otro lado, las particularidades del mercado laboral argentino, signado por altos niveles de desempleo e informalidad hacen del estudio de la economía de plataformas en este país un caso con matices singulares. El presente trabajo analiza, para el caso de Argentina, cómo es la calidad del trabajo en el segmento de plataformas digitales. Para ello, se estima un indicador de calidad del trabajo multidimensional basado en Deguilhem et al. (2020), encontrando que la calidad del trabajo en este segmento no parece estar polarizada, sino más bien aparece concentrada en torno a la baja calidad. |
| Keywords: | Plataformas Digitales; Calidad del Trabajo; Mercado de Trabajo; Argentina; |
| Date: | 2023–07–23 |
| URL: | https://d.repec.org/n?u=RePEc:nmp:nuland:4316 |