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on Informal and Underground Economics |
| By: | Aniello Piscopo |
| Abstract: | Informality represents a pervasive feature of many emerging and developing economies, yet standard macroeconomic models often ignore its effects, potentially biasing the analysis of shocks and the design of monetary policy. This paper studies the macroeconomic and policy implications of informality using a structural VAR for Colombia and a two-agent New Keynesian model with formal and informal sectors, featuring heterogeneous households including hand-to-mouth consumers. I show that informal labor supply shocks generate sectoral reallocation: informal activity absorbs part of the shock, sustaining aggregate output while altering wages, hours, and capital allocation. In contrast, monetary policy shocks propagate more strongly when informality is present, amplifying distributional and capital-reallocation effects. Critically, the presence of informality alters equilibrium determinacy: standard Taylor rules may fail to ensure uniqueness, with stability depending on the share of Ricardian households, the size of the informal sector, and the monetary policy stance. My findings highlight that accounting for informal production is essential for understanding transmission mechanisms and designing effective policy in economies with significant informality. |
| Keywords: | Informal economy; Tax evasion; Monetary policy transmission; Fiscal policy; Public debt; DSGE model; Capital reallocation; Colombia |
| JEL: | E52 E62 E26 H26 O17 O54 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:mib:wpaper:569 |
| By: | Shahroo Malik; Harald Oberhofer; Jordi Paniagua |
| Abstract: | This paper examines how incorporating the informal economy influences the estimated benefits of international trade liberalization. Using a structural gravity framework, we quantify the impact of Free Trade Agreements (FTAs) while explicitly accounting for the presence of shadow (informal) economic activity among trading partners. Specifically, we assess the expected welfare gains from the recently concluded EU–India FTA under a counterfactual scenario in which the informal agricultural sector is integrated into the formal economy. |
| Keywords: | international trade, FTAs, informal/shadow economy, agriculture , structural gravityv |
| JEL: | E26 F13 F14 F17 Q12 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12509 |
| By: | Bergolo, Marcelo (IECON, Universidad de la República); Leites, Martin (IECON, Universidad de la República); Perez-Truglia, Ricardo (Anderson, UCLA); Strehl-Pessina, Matias (University of California, Santa Barbara) |
| Abstract: | Why do some individuals evade taxes while others do not? We study this question using administrative tax records from Uruguay linked to a tailored survey of taxpayers. Using third-party reports, we measure individual income under-reporting as an indicator of evasion. We then examine how three factors predict who evades: social preferences (e.g., honesty measured through incentivized laboratory games), peers (e.g., the behavior of current and former coworkers), and economic factors (e.g., the marginal tax rate). We find that social preferences have little power to predict evasion, while economic factors matter more and peer behavior is the strongest predictor. |
| Keywords: | tax evasion, social preferences, beliefs |
| JEL: | C93 H26 K34 K42 Z13 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18387 |
| By: | Van Cappellen, Hanne; Oliveres Mallol, Adriana |
| Abstract: | Recent research shows that informal casual labour, locally called ganyu, is rapidly increasing in rural Malawi and is closely linked to urbanisation. Understanding the trends in ganyu, its interaction with other livelihood activities like smallholder farming, and its relationship with rising urbanisation is critical for effective policymaking in a context marked by high poverty, underemployment, fast population growth and subsistence farming with decreasing farm sizes. However, up to date data on ganyu comes mainly from labour surveys, which are shown to be inadequate to capture informal labour, offering thus a limited and partial picture of its nature and dynamics. While older qualitative studies provide valuable insights, they are often outdated and fail to capture the evolving realities of ganyu. This paper addresses these gaps by documenting current trends in ganyu, exploring its origins, and examining how its moral and social dimensions have evolved over time. Drawing on our own in-depth, field-collected data, we provide detailed descriptions of ganyu, including the types of tasks performed, payment structures, demographic participation, seasonal variations, and its broader social significance in contemporary Malawi. Compared to previous studies, our research recognizes that ganyu encompasses both agricultural and non-agricultural work, and pays special attention to its relationship with urbanisation. This study makes several key contributions. First, it highlights the growing significance of ganyu as a livelihood strategy in Malawi, and it demonstrates its evolving social and economic nature. Second, it bridges qualitative and quantitative approaches, offering rich, contextual descriptions that enhance the interpretation and use of labour survey data. Third, it underscores the value of localized, qualitative insights in labour research. Finally, it identifies entry points for policymaking by providing a nuanced understanding of ganyu’s role in rural and urban economies. |
| Keywords: | Malawi, labour, informal labour |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:iob:dpaper:202501 |
| By: | Mselmi Chaimae (Université Mohammed Premier [Oujda] = Université Mohammed Ier = University of Mohammed First) |
| Abstract: | Face aux mutations économiques et technologiques contemporaines, l'entrepreneuriat des jeunes s'impose comme un axe stratégique majeur des politiques publiques de développement au Maroc. Toutefois, malgré la multiplication des programmes d'appui et d'incitation à la création d'entreprises, la persistance d'un secteur informel important révèle des dysfonctionnements structurels, parmi lesquels figurent la complexité du système fiscal et la faiblesse de la culture de conformité. Dans ce contexte, la digitalisation fiscale apparaît comme un levier déterminant susceptible de favoriser l'intégration des jeunes entrepreneurs dans l'économie formelle.Cette recherche adopte une approche qualitative fondée sur une revue approfondie de la littérature académique et institutionnelle relative à l'entrepreneuriat des jeunes, à la gouvernance fiscale et à la transformation numérique des administrations publiques. L'analyse mobilise des travaux nationaux et internationaux ainsi que des rapports émanant d'organismes publics marocains, notamment la Direction Générale des Impôts (DGI), le Haut-Commissariat au Plan (HCP) et l'Agence Nationale de Promotion de l'Emploi et des Compétences (ANAPEC).Les résultats montrent que la digitalisation des procédures fiscales contribue à la réduction des coûts administratifs, à l'amélioration de la transparence et à la simplification de la relation entre l'administration fiscale et les jeunes entrepreneurs. Elle permet notamment de diminuer les délais de traitement des déclarations, de réduire les risques d'erreurs et de faciliter l'accès à l'information fiscale. Toutefois, son impact demeure limité par des facteurs tels que l'insuffisance des compétences numériques, la faible sensibilisation aux obligations fiscales, la persistance de la méfiance institutionnelle et les inégalités territoriales d'accès aux infrastructures numériques.L'étude conclut que la digitalisation fiscale, bien qu'essentielle, ne saurait à elle seule stimuler durablement l'entrepreneuriat des jeunes sans un dispositif d'accompagnement global incluant formation fiscale et numérique, simplification réglementaire, gouvernance inclusive et mécanismes incitatifs adaptés aux spécificités des jeunes entrepreneurs. Une approche systémique impliquant l'ensemble des parties prenantes (administration fiscale, établissements de formation, structures d'accompagnement, secteur privé) s'avère indispensable pour maximiser les retombées de la transformation numérique sur l'écosystème entrepreneurial. |
| Keywords: | Tax digitalization, Business formalization, Public governance, Tax compliance, Digital transformation, Morocco, Youth entrepreneurship, Youth entrepreneurship Tax digitalization Business formalization Public governance Tax compliance Digital transformation Morocco |
| Date: | 2025–12–31 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05450839 |
| By: | Jones, Sam; Manhique, Ivan |
| Abstract: | Digital labour platforms have grown five-fold over the past decade, enabling significant expansion of gig work worldwide. We interrogate the critique that these platforms tend to amplify aggregate shocks for registered workers. Based on the universe of records from a matching platform for manual freelancers in Mozambique, we analyse how task supply and demand altered with the onset of COVID-19. Treating the pandemic as a structural break, which extends to an event study analysis, we find it was associated with a net increase in tasks demanded per worker, but no clear change in supply growth (new registrations). While these general trends are evident across multiple market segments, there is also evidence of relatively higher demand for female as compared to male workers during the pandemic. This suggests digital labour markets can help some workers adjust to economic shocks in low-income contexts. |
| Keywords: | COVID-19; digital labour platforms; economics shocks; freelancers; informal sector; Mozambique |
| JEL: | J23 J40 O17 |
| Date: | 2025–01–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126995 |