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on Informal and Underground Economics |
| By: | Roberto Dell'Anno (Department of Economics and Statistics - University of Salerno - Italy and CELPE); Marcello Puca (Department of Economics and Statistics - University of Salerno - Italy, CELPE and CSEF) |
| Abstract: | Measuring illicit behavior such as tax evasion and underground economy through surveys is challenging due to social desirability bias. We examine how interviewer–respondent social distance affects the reporting of informal employment in an anonymous survey conducted by university students. Using variation in the relationship between inter- viewer and respondent, we estimate probit models and find that disclosure is lowest when the interviewer is a relative or friend, and higher when the interviewer is either an immediate family member or someone with no prior connection. This non-monotonic pattern suggests that both trust and anonymity facilitate truthful reporting, while intermediate social proximity increases self-censorship. The findings highlight a previously overlooked source of measurement error in survey-based estimates of informal labor. |
| Keywords: | Survey Methods; Informality; Tax Evasion; Social Distance |
| JEL: | C83 J46 H26 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:sal:celpdp:021754 |
| By: | Derenoncourt, Ellora (Princeton University); Gerard, Francois (Queen Mary, University of London); Lagos, Lorenzo (Brown University); Montialoux, Claire (UC Berkeley) |
| Abstract: | How do minimum wages affect informality? We study the near-doubling of the real minimum wage from 2000 to 2009 in Brazil, where 46% of the workforce is informal. Using labor force surveys covering the informal sector, we show the minimum wage exhibits near full passthrough to informal employees working in formal firms, about half of all informal employees. The formal-to-informal reallocation elasticity with respect to the formal wage is small: -0.28. Our findings illustrate how minimum wages can positively affect living standards for workers thought beyond the reach of labor law, a sizable share of the workforce in developing economies. |
| Keywords: | informality, minimum wages, inequality |
| JEL: | J23 J46 J88 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18234 |
| By: | Mariano Bosch (Inter American Development Bank); Guillermo Cruces (Universidad de San Andrés-CONICET, University of Nottingham); Stephanie González (CEDLAS-FCE-UNLP); María Teresa Silva-Porto (Inter American Development Bank) |
| Abstract: | In developing countries, informal labor is not only employed by illegal or unregistered firms but also by legal firms that hire workers informally, known as the intensive margin of labor informality. Reducing this type of work may have ambiguous effects on formal employment, depending on factors such as firm size and productivity. In collaboration with Peru’s labor inspection authority, we conducted a randomized mailing experiment targeting large firms with a high propensity for employing workers informally. The authority sent letters with either deterrence messages detailing fines for non-compliance or social norms messages highlighting the positive impacts of formality. We analyzed the impact of this intervention on formal employment levels over the following two years using monthly administrative data. The treated firms (particularly those in the deterrence treatment arm) and larger firms increased their formal employment levels. However, these increases followed a seasonal pattern coinciding with the high labor demand during the tourist season, suggesting that prior to the intervention, firms were employing temporary workers informally. The higher perceived cost of non-compliance led them to formalize some of these workers. The informal hiring of seasonal workers by these firms appears to have been motivated by basic tax evasion, and the absence of a negative effect on firm-level formal employment indicates that the firms were exploiting rents from low enforcement of regulations. |
| Keywords: | Randomized Controlled Trial, Social Security, Tax Audit, Tax Evasion, Mailing, Informality, Labor formalization |
| JEL: | C93 D91 H55 J46 O17 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:sad:wpaper:172 |
| By: | Priya Manwaring; Tanner Regan |
| Abstract: | Public disclosure of tax behavior is potentially promising for raising compliance in low-capacity states. This paper provides evidence on the social determinants of tax compliance through two cross-randomized experiments in Kampala, Uganda. We estimate effects of reporting delinquents and recognizing compliers. Compliance increases 17% for those subject to reporting but falls 16% for those promised recognition. Results support a model where being publicly known as tax-liable is costly but social sanctions for delinquency are limited. Further, disseminating tax behavior causes recipients to update compliance beliefs downward and reduces actual compliance by 20%. Overall, simple enforcement reminders raise more revenue. |
| Keywords: | property tax; tax morale; public disclosure; social image; Africa. |
| JEL: | H26 H30 D91 O18 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:gwc:wpaper:2025-010 |
| By: | Miguel Almunia (Institute for Fiscal Studies); David Henning (Oxford University); Justine Knebelmann (Sciences Po); Dorothy Nakyambadde (Uganda Revenue Authority); Lin Tian (INSEAD) |
| Date: | 2025–10–30 |
| URL: | https://d.repec.org/n?u=RePEc:ifs:ifsewp:25/51 |