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on Informal and Underground Economics |
| By: | Grover, Arti Goswami; Pereira Lopez, Mariana De La Paz |
| Abstract: | Using three rounds of data from the Business Pulse Survey in South Asia, this paper studies the differential effects of the COVID-19 shock on informal firms. It also captures heterogeneity within informal firms based on the degree and motivation of informality. The findings suggest that the severity of the impact of the COVID-19 shock and the recovery speed are strongly associated with the degree of informality. Firms' external attributes, such as size, sector, age, and gender of the owner, do not explain the depth of the impact. Internal characteristics such as poor management capabilities and education of the manager and owners are strong predictors of vulnerability among informal firms. In particular, necessity firms experience a larger drop in sales relative to the parasitic type of informal firms. To add to this, the adjustment response (for example, the use of digital platforms) of informal firms is smaller, which perpetuates the gap between formal and informal firms. Within informal firms, the parasitic type typically have a smaller adjustment response. These findings have implications for policies to support the private sector in the presence of informality, including considerations pertaining to targeting, modality of support, and the instruments required for designing more impactful programs during shocks. |
| Date: | 2023–10–02 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10579 |
| By: | Rozo Villarraga, Sandra Viviana; Quintana, Alejandra; Urbina Florez, Maria Jose |
| Abstract: | How does easing the economic integration of forced migrants affect native voting behaviors in the Global South This paper assesses how the regularization of half a million Venezuelan forced migrants affected the electoral choices of Colombian natives by comparing election results in municipalities with higher and lower take-up rates for a program that supports forced migrants. The findings show negligible impacts on native voting behavior. The study then conducted a survey experiment to investigate the lack of voter response. Even after receiving information about the pro-gram, Colombian voters showed no changes in voting intentions or prosocial views toward migrants. This suggests that their indifference did not stem from a lack of awareness about the program. In contrast, the electoral indifference of natives may be explained by the fact that the program did not change labor and crime outcomes for native Colombians, and most migrants remained in the informal sector despite benefiting from the program through improvements in labor conditions and better access to public services. |
| Date: | 2023–03–06 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10342 |
| By: | Fernandes, Ana Margarida; Silva, Joana C. G. |
| Abstract: | This paper estimates worker, firm and assistance programs’ responses to foreign shocks in Brazil exploiting quasi-experimental variation in firms’ foreign demand resulting from the Global Financial Crisis. It shows these transitory shocks have permanent effects in a setting characterized by a large informal sector. While the informal sector provides a buffer mitigating long-term scarring, it is not sufficient to compensate worker and firm scarring. Scarring occurs for incumbent workers, not just displaced workers. Linking employer-employee data with the national registry of low-income households, unemployment insurance disbursement records, and worker-level training, the paper finds that assistance programs fail to mitigate adjustment. Training does not respond, unemployment insurance compensates 4 percent of workers’ wage losses and welfare programs 2 percent. Firms in highly concentrated sectors or state-owned do not bear the burden of adjustment. Other firms bear the burden and either exit or restructure, downsizing employment and productivity, scarring incumbent workers and increasing long-run inequality. |
| Date: | 2023–05–18 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10448 |
| By: | Soundararajan, Vidhya; Soubeiga, Sidiki; Newhouse, David Locke; Palacios-Lopez, Amparo; Pape, Utz Johann; Weber, Michael |
| Abstract: | Online surveys are convenient, cost-effective, speedy, and increasingly popular instruments for data collection. This study investigates whether online surveys that used Random Domain Intercept Technology to recruit respondents were accurately measured labor market outcomes in six middle-income countries in the aftermath of the COVID-19 pandemic. Compared with the national average, online surveys oversampled males, youth, those with higher levels of education, and those in smaller households. Reweighting using propensity score estimates fails to equalize the means of variables excluded from the model. When comparing the employment-to-population ratio from the internet surveys to the most recent relevant nationally representative surveys, the average deviation is 30 percent. Reweighting using propensity scores in that case worsened the bias. Internet survey estimates of informal and self-employment rates also tend to be inconsistent with benchmark data, although the latter are available for fewer countries. Overall, the results suggest that despite the advantages and convenience of recruiting internet survey participants through Random Domain Intercept Technology, the resulting sample is not representative and even after propensity score reweighting, it can yield estimates that are at odds with nationally representative surveys. |
| Date: | 2023–03–13 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10359 |
| By: | Gansey, Romeo Jacky; Genoni, Maria Eugenia; Helmy, Imane Abdelfattah Ahmed Refaat |
| Abstract: | The COVID-19 pandemic impacted the Arab Republic of Egypt’s economy and its people in many ways. By combining micro-simulations and imputation techniques, this paper models early impacts of the pandemic on household income and the role of cash transfers from the Government of Egypt in supporting households and workers. As expected, and consistent with other evidence, the estimates show that the pandemic shock decreased labor incomes and increased income poverty in Egypt. It was estimated that in fiscal year 2020, average household income per capita contracted by about 1.7 percent, and income poverty was about 2.2 percentage points higher, compared to a non-COVID-19 scenario for the same year, using the international poverty line of $3.65 a day (2017 purchasing power parity). Labor income losses were widespread across the country, disproportionately affecting informal workers. The results also suggest that expanded social protection cash transfers and targeted cash assistance to Egypt’s informal and tourism sectors played a substantial role in smoothing the initial labor income shock. In the absence of compensatory cash transfers, income poverty would have been 1.1 percentage points higher. The compensatory measures, in particular the cash transfer programs Takaful and Karama, preferentially protected rural households due to the programs’ targeting rules. Thus, households in urban areas were significantly more likely to become income poor, compared to those in rural settings. |
| Date: | 2023–05–09 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10440 |
| By: | Paola Tubaro (CNRS - Centre National de la Recherche Scientifique, ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique, CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, IP Paris - Institut Polytechnique de Paris); Antonio A. Casilli (NOS - Numérique, Organisation et Société - I3 SES - Institut interdisciplinaire de l’innovation de Telecom Paris - Télécom Paris - IMT - Institut Mines-Télécom [Paris] - IP Paris - Institut Polytechnique de Paris - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique, SES - Département Sciences Economiques et Sociales - Télécom Paris - IMT - Institut Mines-Télécom [Paris] - IP Paris - Institut Polytechnique de Paris); Mariana Fernández Massi (IdIHCS - Instituto de Investigaciones en Humanidades y Ciencias Sociales [La Plata] - CONICET - Consejo Nacional de Investigaciones Científicas y Técnicas [Buenos Aires] - FaHCE - Facultad de Humanidades y Ciencias de la Educación [La Plata] - UNLP - Universidad Nacional de la Plata [Argentine], CONICET - Consejo Nacional de Investigaciones Científicas y Técnicas [Buenos Aires]); Julieta Longo (IdIHCS - Instituto de Investigaciones en Humanidades y Ciencias Sociales [La Plata] - CONICET - Consejo Nacional de Investigaciones Científicas y Técnicas [Buenos Aires] - FaHCE - Facultad de Humanidades y Ciencias de la Educación [La Plata] - UNLP - Universidad Nacional de la Plata [Argentine], CONICET - Consejo Nacional de Investigaciones Científicas y Técnicas [Buenos Aires]); Juana Torres-Cierpe (Inria Siège - Inria - Institut National de Recherche en Informatique et en Automatique); Matheus Viana Braz (UEM - Universidade Estadual de Maringá [Brasil] = State University of Maringá [Brazil] = Université d'État de Maringá [Brésil]) |
| Abstract: | The current hype around artificial intelligence (AI) conceals the substantial human intervention underlying its development. This article lifts the veil on the precarious and low-paid ‘data workers' who prepare data to train, test, check, and otherwise support models in the shadow of globalized AI production. We use original questionnaire and interview data collected from 220 workers in Argentina (2021-22), 477 in Brazil (2023), and 214 in Venezuela (2021-22). We compare them to detect common patterns and reveal the specificities of data work in Latin America, while disclosing its role in AI production. We show that data work is intertwined with economic hardship, inequalities, and informality. Despite workers' high educational attainment, disadvantage is widespread, though with cross-country disparities. By acknowledging the interconnections between AI development, data work, and globalized production, we provide insights for the regulation of AI and the future of work, aiming to achieve positive outcomes for all stakeholders. |
| Keywords: | Artificial intelligence, Data work, Informal economy, Global inequalities, Latin America |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04935984 |
| By: | Ferhat, Samia; Joubert, Clement Jean Edouard |
| Abstract: | This paper studies the early career dynamics of employment and formality using data from the Arab Republic of Egypt. With 14 rounds of Egypt’s labor force surveys several measures of informality and underemployment are constructed to examine how the labor market conditions faced by young men when they exit school shape their future employment trajectories. Employment outcomes at different levels of potential experience are linked to cross-cohort, cross-regional and cross-schooling level variation in labor market conditions at graduation to achieve identification. The results show that cohorts of Egyptian men who enter a labor market in which employment rates are high (low) are only better (worse) off for a few years. These fast mean reversals stand in contrast to the typical finding from rich countries that scarring effects persist through the first decade of a worker’s career. |
| Date: | 2023–06–26 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10499 |
| By: | Montoya Munoz, Kelly Yelitza; Olivieri, Sergio Daniel; Silveira Braga, Cicero Augusto |
| Abstract: | Economists have long been interested in measuring the poverty and distributional impacts of macroeconomic projections and shocks. In this sense, microsimulation models have been widely used to estimate the distributional effects since they allow accounting for several transmission channels through which macroeconomic forecasts could impact individuals and households. This paper innovates previous microsimulation methodology by introducing more flexibility in labor earnings, considering intra-sectoral variation according to the formality status, and assessing its effect on forecasting country-level poverty, inequality, and other distributive indicators. The results indicate that the proposed methodology accurately estimates the intensity of poverty in the most immediate years indistinctively of how labor income is simulated. However, allowing for more intra-sectoral variation in labor income leads to more accurate projections in poverty and across the income distribution, with gains in performance in the middle term, especially in atypical years such as 2020. |
| Date: | 2023–06–22 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10497 |
| By: | Kastoryano, Stephen (University of Reading) |
| Abstract: | This paper reveals how tax complexity, in the form of loopholes and assets overlapping different sections of tax returns, contributes to tax avoidance and evasion. Using administrative data from the Netherlands, it shows how an auditing announcement in 2005 triggered large increases in declared assets and properties, predominantly held by the wealthiest segments of society, in unexpected sections of the tax returns. It further takes advantage of a one-year reduction in the dividend tax rate, which coincided with another auditing announcement in 2007, to more specifically assess strategic spontaneous declarations and shifting among shareholders, particularly those with substantial company holdings. The results highlight taxpayer contingency plans and opportunistic behaviour when declaring previously hidden wealth. They also emphasize how the ambiguity of certain assets' classifications can be coopted to strategically shift wealth in response to new tax policies. |
| Keywords: | tax complexity, tax evasion, tax avoidance, auditing announcements |
| JEL: | H26 H83 K34 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17722 |
| By: | Adhikari, Samik; Seetahul, Suneha |
| Abstract: | This paper takes stock of the insights and learnings from a COVID-19 emergency cash transfer program that was administered to vulnerable informal sector workers in Sierra Leone. It starts by reviewing relevant examples of cash transfer programs that were instituted in response to the COVID-19 crisis. It then describes the context, intervention, and data of the emergency cash transfer program, before presenting a quasi-experimental analysis of the emergency cash transfer’s potential impacts on various measures of economic security and subjective well-being of households with urban informal sector workers. The analysis is conducted by matching administrative data to survey data and using program eligibility criteria and inverse probability weights to identify the short- and medium-term relationship between a one-off US$135 cash transfer and various labor market, food security, human capital, and subjective well-being outcomes for recipient and nonrecipient households of the emergency cash transfer. The analysis finds a positive potential impact of the transfer and the number of hours worked as well as employment in the medium term. It also finds that program beneficiaries report higher chances of their main income increasing or staying the same compared to nonbeneficiaries. The positive correlation between the transfer and income disappears over the medium term, perhaps suggesting that one-off transfers work best to cushion vulnerable self-employed households and informal wage workers in the short term but do not impact medium-term employment or income. |
| Date: | 2023–04–06 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10395 |
| By: | Collin, Matthew Edward |
| Abstract: | This paper estimates the policy and economic impacts of a European Union–led effort to review and “blacklist” jurisdictions based on their compliance with international standards designed to curb corporate profit shifting and private tax evasion. Using a combination of regression discontinuity and difference-and-difference methods, there is evidence of only limited improvements in tax governance four years after the inception of the list. There is also no clear evidence that the listing exercise had any impact on offshore wealth or shifted profits, largely because the bulk of jurisdictions that host both of these were not targeted by the European Union. The results suggest that “coercive” efforts to reduce global tax evasion and avoidance will struggle without better targeting and enforcement. |
| Date: | 2023–05–04 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10435 |
| By: | Raluca Pavel; Bernur Acikgoz (IKCU - Izmir Katip Celebi University); Jean‐christophe Poudou (MRE - Montpellier Recherche en Economie - UM - Université de Montpellier); Marc Willinger (CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier) |
| Abstract: | We investigate the effects of retroactive audits and varying statutes of limitations on tax compliance through a laboratory experiment. First, we solve a dynamic model using Bellman's solution to show that longer limitation periods promote compliance by raising expected penalties, as each past period carries a higher probability of inspection. Second, in our experiment, we manipulate the statute of limitations (0, 1, 3, and 6 periods), providing data that support the model's predictions. Our data also suggest that a 3-year statute of limitation optimally balances compliance benefits with administrative efficiency.This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made. |
| Keywords: | laboratory experiment, retroactive audits, statute of limitations |
| Date: | 2025–02–04 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04937321 |