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on Informal and Underground Economics |
| By: | Gabriel Montes-Rojas; Fernando Toledo; Juan Manuel Rodr\'iguez Repeti |
| Abstract: | This paper studies what happens when AI gets cheaper, with emphasis on the labor market outcomes, whether it creates formal jobs or whether it pushes workers into informality. We argue that the answer depends on the elasticity of substitution between imported AI capital and formal labor. We build a small open economy DSGE model with a dual labor market, imported AI capital, and country risk, calibrated to an economy where informality is pervasive. The same decline in AI prices produces sharply different labor-market outcomes depending on whether AI substitutes or complements formal workers. Under substitution, cheaper AI weakens formal labor demand and increases the role of the informal sector as an employment buffer. Under complementarity, it expands formal employment and amplifies output, wages, investment, and capital accumulation. The model therefore shows that AI can become either a source of displacement pressure or a driver of formal-sector expansion, depending on how it interacts with human labor. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.15381 |
| By: | Vilá, Joan (IECON, Universidad de la República); Bergolo, Marcelo (IECON, Universidad de la República); Cruces, Guillermo (University of Nottingham) |
| Abstract: | Standard welfare evaluations of means-tested transfers typically focus on households directly exposed to eligibility enforcement. We show that this approach misses important spillovers when enforcement events transmit information through workplace networks. We study Uruguay’s AFAM-PE conditional cash transfer, where income eligibility is monitored monthly using administrative records of formal earnings, but many beneficiaries have limited knowledge of the income rule. Linking program records, social security data, and firm identifiers, we construct workplace networks and estimate spillovers using a fuzzy RD design around the income threshold. Coworkers of peers just above the cutoff reduce registered labor earnings by 20%; the fuzzy RD estimate implies a decline of about one-third of baseline earnings following a peer’s suspension. The response is persistent, operates mainly through formal employment, and largely reflects transitions to informal work. Spillovers are stronger in small firms, among similar coworkers, and when peers contact the support service. Incorporating these indirect responses lowers the estimated MVPF from 0.53 to 0.36. |
| Keywords: | social assistance, income-testing, enforcement spillovers, peer effects, workplace networks, informality, MVPF |
| JEL: | H53 H75 I38 J13 J22 J46 O17 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18785 |
| By: | Nandwani, Bharti; Roychowdhury, Punarjit; Shankar, Binay |
| Abstract: | Informal enterprises employ most of India's non-agricultural workforce, yet little is known about how they cope with rising temperatures. Combining satellite-derived temperature data with roughly 1.7 million firm records from five rounds of India's unincorporated-enterprise surveys (2010-2024), we estimate the effect of heat stress on informal-sector labor demand. We find that greater exposure to elevated temperatures reduces labor demand: firms employ fewer workers and hire less. The decline is accompanied by lower turnover, value added, and labor productivity, together with shorter working hours and fewer operating months, suggesting that heat induces firms to contract both the scale and intensity of production. The adverse employment effects are strongest among employer firms, manufacturing and service enterprises, and businesses operating outside the household, and have intensified over time. Finally, drawing on the Periodic Labour Force Survey, we show that labor-force participation does not fall while real wages decline-the signature of a demand contraction, not a supply withdrawal. |
| Keywords: | Firms, Heat, India, Informal Sector, Labor Demand, Temperature |
| JEL: | L25 Q54 O17 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1785 |
| By: | Arias, Omar (World Bank); Cesar, Andres (CEDLAS-UNLP); Fukuzawa, Daisuke (World Bank); Le, Duong (World Bank) |
| Abstract: | We examine the labor market effects of industrial robot adoption in Viet Nam. Using differences between districts in their initial industrial structure and exposure to global robotization trends, we find that robot adoption between 2014 and 2020 increased employment, wages, and the inflow of skilled workers. More exposed districts also experienced faster growth in value added, labor productivity, and trade flows. Employment and wage gains were concentrated among middle and high-skilled workers, while low-skilled workers were driven into informal employment or out-migration. We also find positive spillovers to neighboring districts, consistent with production linkages and higher demand for non-tradable goods. |
| Keywords: | Industrial Robots, Local Labor Markets, Wages, Informality, Migration, Export-led Growth, Viet Nam |
| JEL: | J23 J24 J31 O12 O14 O17 O33 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18845 |
| By: | Boas, Hjalte Fejerskov; Johannesen, Niels; Kreiner, Claus; Larsen, Lauge; Zucman, Gabriel |
| Abstract: | In the second half of the 2010s more than 100 countries - including all large offshore financial centers - started to automatically exchange bank information with foreign tax authorities. This informational big-bang marks a break with the situation of offshore bank secrecy that prevailed before. We study its effects on tax compliance by analyzing the universe of information reports sent by foreign banks to Danish authorities, matched to population-wide micro-data on income, wealth, and cross-border bank transfers. In response to the automatic exchange of bank information, tax evaders may repatriate previously undeclared offshore wealth, they may start to self-report offshore income to the tax authorities, or the tax authorities may detect their evasion in audits that use the new information reports. Using a variety of research designs, we find large compliance effects along all these margins, with the largest response coming from repatriation of wealth. Overall we estimate that the automatic exchange of bank information has closed about 70% of the offshore tax gap. These results highlight the power of international cooperation to improve tax compliance in a globalized world. |
| Keywords: | Tax havens; Tax enforcement; Globalization |
| JEL: | D31 H24 H26 K34 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19553 |
| By: | Busso, Matías; Messina, Julián; Quigua, Juliana |
| Abstract: | This study examines whether information about corruption and tax evasion changes perceived unfairness in the income distribution, perceived inequality of opportunity, and support for specific redistributive policies. Using a survey experiment administered in eight Latin American countries, we find that factual information about public corruption and elite tax evasion increases perceptions of unfairness and unequal opportunity. It also increases support for taxing rich households relative to middle-class households. However, these effects do not extend to broader tax-financed redistribution: respondents do not become more supportive of raising corporate taxes, broadening the personal income tax, or increasing the VAT to finance social spending, nor do they become more supportive of expanding conditional cash transfers or non-contributory pensions through higher taxes. The results are consistent with trust limiting the translation of inequality concerns into support for broader tax-financed redistribution: the treatments increased perceived elite influence over government policy and reduced some measures of trust in public officials and firms. |
| JEL: | D31 H21 H26 D73 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14661 |
| By: | Goeb, Joseph; Minten, Bart; Aung, Nilar; Ei Win, Hnin |
| Abstract: | Access to timely credit is widely viewed as an important determinant of improved agricultural investment and productivity. However, little is known about how agricultural credit markets function during prolonged conflict. This paper examines how conflict shapes both the receipt of agricultural credit and the provision of informal credit by agrifood businesses in Myanmar, where conflict has been widespread in after 2021. Using rare data from both farmers and firms, we document a substantial decline in formal credit after conflict, but stable receipt of informal credit. In conflict-affected areas, formal credit receipt declined sharply – most notably from government-supported schemes and from microfinance institutions – while informal credit was more resilient – especially from friends and family and agribusinesses. Using direct elicitation methods of credit constraint classifications, we show that farmers in high conflict areas are more likely to voluntarily withdraw from credit markets and shift to self-financing. On the supply side, conflict has insignificant relationships to farm-credit provision by input retailers and rice mills. Taken together, our findings highlight the informal segment of agricultural credit markets as an underappreciated source of resilience in conflict-affected settings. |
| Keywords: | credit; conflicts; agricultural credit; access to finance; investment; Myanmar; Asia; South-eastern Asia |
| Date: | 2026–06–29 |
| URL: | https://d.repec.org/n?u=RePEc:fpr:ifprwp:183542 |
| By: | Yuvika Chaudhury; Aritri Chakravarty (Assistant Professor, Madras School of Economics, Chennai, India.) |
| Abstract: | Access to formal credit plays a crucial role in enhancing agricultural productivity and mitigating risks in rural India. Despite sustained policy interventions, a significant share of agricultural households continues to rely on informal credit sources, often under unfavorable terms. This study investigates the determinants of formal credit access in Indian agriculture using unit-level data from the 77th Round of the National Sample Survey (NSS) on the Situation Assessment of Agricultural Households, covering the 2018–19 agricultural year and comprising around 58, 000 rural households. The analysis addresses three core dimensions: (i) household-level determinants of the percentage share of formal loans, (ii) factors influencing the likelihood of obtaining a loan for agricultural purposes, and (iii) the elasticity of credit demand with respect to interest rates. Ordinary Least Squares (OLS), logistic regression, and log-log models are employed to analyze the demand side factors influencing the above dimensions. OLS results indicate that institutional linkages such as access to Kisan Credit Cards (KCC), crop insurance, and membership in farmer organizations substantially increase the share of formal loans. Higher consumption expenditure and larger landholdings are also positively associated. The logistic regression model reveals that households engaged in crop production are significantly more likely to access agricultural loans, especially when supported by KCC and insurance coverage. The log-log model shows credit demand to be inelastic with respect to interest rates, reflecting structural constraints. These findings underscore the critical role of institutional inclusion and economic capacity in enabling formal credit access, while highlighting the persistent limitations in expanding credit demand in rural IndiaLength: 52 pages |
| Keywords: | Agriculture, Access to Credit, Farm Households, Interest SensitivityClassification-JEL: Q1, Q12, Q14 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:mad:wpaper:2026-307 |
| By: | Chandhini Anbalagan (Research Scholar, Madras School of Economics, Chennai, India.); Zareena Begum Irfan (Professor, Madras School of Economics, Chennai, India.) |
| Keywords: | Housing deprivation ; Multiple Correspondence Analysis ; Housing Adequacy ; Urbanisation. Classification-JEL: : R21, R31, I32, C38Abstract: Despite a significant decline in extreme poverty rates, the rising inequalities and rapid urbanization in mega cities of India have exacerbated the problems of inadequate housing, overcrowding, and the proliferation of informal settlements. Given the multidimensional nature of housing deprivation, the study employed 18 key indicators of housing deprivation from the 76th National Sample Survey on Drinking Water, Housing, and Sanitation to develop the “Housing Deprivation Index” at the household level for the year 2018. Multiple Correspondence Analysis (MCA) was employed to endogenously weight the 18 housing quality indicators, with the first dimension explaining 73% as a latent construct of the housing deprivation level. State level estimates of housing deprivation reveal stark interstate disparities. Housing deprivation in India is shaped by social, spatial and economic inequality with disadvantaged caste, rural households and poorer households experiencing significantly high deprivation. These findings underscore the need for housing policy to occupy a central position in India amid rapid urbanization and persistent spatial and socio-economic inequalities in adequate housingLength: 34 pages |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:mad:wpaper:2026-308 |
| By: | Pantaleão, Bruno; Montini, Isabella C. |
| Abstract: | Using newly available data from the 2022 Brazilian Census, combined with administrative and geospatial sources, this paper provides a national overview of living conditions in Brazilian favelas and urban communities. We document large and persistent disparities between favela residents and other urban populations in terms of income, education, access to basic sanitation, and urban infrastructure. Favela dwellers are less likely to have access to adequate water, sewage, waste collection, and neighborhood-level amenities such as paved streets, public lighting, and accessible sidewalks. These infrastructural deficits are associated with reduced access to employment, education, healthcare, and social assistance opportunities, particularly in cities where public transport travel-time estimates are available. Beyond socioeconomic deprivation, we show that exposure to environmental hazards is widespread. Together, the results show how informal urbanization in Brazil systematically concentrates social disadvantage, limited access to opportunities, and environmental vulnerability, deepening long-standing spatial inequalities within cities. |
| Date: | 2026–07–20 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:97yb5_v1 |
| By: | Adesina, Bukade; Bauchet, Jonathan; Ricker-Gilbert, Jacob |
| Abstract: | Food safety failures in informal food markets remain widespread, driven by the unobservability of food contaminants, information asymmetries between producers and consumers, and the lack of incentive to supply safe foods. Whether market-based mechanisms can support food safety improvements, and under what conditions such markets can emerge, remains unclear. These issues are salient in cyanide-safe cassava product markets, leading to serious health risks for hundreds of millions who consume cassava foods as a staple. We implemented a randomized controlled trial combined with experimental auctions among 1, 200 small-scale cassava processors and 792 consumers in Nigeria to estimate supply and demand conditions that can lead to a market for safe gari (a cassava flour). We specifically evaluated whether training, price incentives, and information can spur the supply and demand of cyanide-safe gari in the same market. At midline, training alone and training combined with price incentive reduced cyanide concentrations by 14.7 and 17.5 ppm respectively, increasing WHO compliance by 35 and 70 percentage points. At a six-month follow-up, both effects persisted with near-equal magnitude 15.4 and 15.5 ppm reductions, and compliance gains of 69 and 74 percentage points.. Consumers were willing to pay more than processors required as a premium to produce safe gari, by a margin large enough to suggest that a market for safe food exists given simple processor training and consumer information. Overall, results show informal food markets can internalize safety when the costs of producing safe foods are low, and training and information are provided. |
| Keywords: | Food Consumption/Nutrition/Food Safety |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404544 |
| By: | Ibhar C. Beramendi Illanes (Universidad Privada Boliviana (UPB)); Ivette Illanes Fajardo (Escuela Militar de Ingeniería) |
| Abstract: | Este estudio analiza los determinantes del empleo informal en Bolivia mediante una combinación de técnicas econométricas tradicionales, métodos de machine learning y enfoques híbridos. Utilizando datos de las Encuestas de Ho-gares 2022 y 2023, se identifican los factores individuales y del hogar que influyen en la probabilidad de pertenecer al empleo informal. Los resultados muestran que variables como la edad, el nivel educativo, el ingreso del hogar y el género son deter-minantes clave. El Random Forest destaca el papel central de los ingresos laborales, usualmente excluidos por problemas de endogeneidad. El Adaptive Lasso permite identificar relaciones no lineales e interacciones complejas, como las asociadas al gé-nero, la pertenencia a grupos originarios y la presencia de niños pequeños en el hogar. Se concluye que el fenómeno del empleo informal responde a dinámicas multidimensionales que requieren enfoques analíticos integradores para el diseño de políticas públicas más efectivas y focalizadas. |
| Keywords: | Empleo Informal, Probit, Machine Learning, Adaptive Lasso |
| JEL: | J46 C20 C45 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:iad:wpaper:1125 |