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on Informal and Underground Economics |
| By: | Dietrich, Stephan (Maastricht Graduate School of Governance, RS: GSBE MGSoG, RS: UNU-MERIT Theme 2); Markhof, Yannick (Maastricht Graduate School of Governance, RS: GSBE MGSoG); Vincent, Rose Camille |
| Abstract: | We provide novel evidence on bureaucratic fragmentation and weak tax administrations as central enablers of low revenue mobilization in low-income countries. In collaboration with the municipal and national tax authorities in Kampala, Uganda, we cross-link previously siloed tax records for 155, 000 firms and conduct a large-scale experiment with 60, 000 firms. We document pervasive and selective tax evasion: only 14% of verifiably active firms comply with both government tiers. Cross-record linkage almost triples detectable non-compliance while offering increased enforcement efficiency. This coordination dividend is left untapped. Firms exploit the resulting loopholes through partial informality, re-registering under new identities, and strategic late payments. In a cross-authority field experiment, deterrence nudges, including messages signaling inter-authority coordination, fail to offer a light-touch alternative to addressing fragmentation directly. Our findings establish bureaucratic fragmentation as a distinct and costly source of passive waste in tax administration that existing approaches to revenue mobilization rarely address. |
| Keywords: | Taxation, Tax evasion, Tax administration, Low-income countries, Nudges |
| JEL: | H26 H20 H71 C93 O12 |
| Date: | 2026–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:unm:unumer:2026007 |
| By: | Daniel Coll Sol (Tax Justice Network, London, United Kingdom); Mario Cuenda Garcia (Tax Justice Network, London, United Kingdom); Bathusi Gabanatlhong (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague,); Miroslav Palansky (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague,); Tijmen Tuinsma (Tax Justice Network, London, United Kingdom) |
| Abstract: | This paper introduces the abnormality method to estimate illicit financial flows (IFFs) using a bilateral gravity model complemented by a machine learning technique to analyse unexplained financial flows to offshore centres. The findings provide robust evidence linking abnormal flows to offshore financial centres with tax avoidance and evasion and offer new estimates of their scale, costs, and geographical distribution. In 2023, abnormal flows to tax havens and secrecy jurisdictions reached US$2.8 trillion, resulting in foregone tax revenues exceeding US$60 billion. These flows originated mainly from Europe, the Americas, and Asia, flowing mostly to European tax havens. Random Forest analysis confirms that tax haven and secrecy jurisdiction status are key determinants of abnormal financial flows. Furthermore, the analysis of the Automatic Exchange of Information (AEOI) regulation indicates an increase in abnormal flows held in secretive jurisdictions. |
| Keywords: | Illicit Financial Flows, Offshore Financial Centres, Revenue Losses, Machine Learning, Automatic exchange of Information |
| JEL: | H26 F21 F23 C45 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:fau:wpaper:wp2026_08 |
| By: | Bíró, Anikó; Elek, Péter; Jascisens, Vitalijs; Prinz, Daniel; Sándor, László; Zasova, Anna |
| Abstract: | This paper studies the interaction of the contribution-benefit link with tax evasion in the context of parental benefits in Hungary and Latvia. Across the two countries, institutional settings, and time periods, earnings and employment patterns suggest substantial pre-pregnancy underreporting, followed by partial formalization during pregnancy to increase benefits. Using policy reforms, the paper shows that the reporting response tracks changing incentives. The results indicate that even with third-party reporting, income underreporting can be common. Linking benefits to contributions when earnings are underreported may reduce evasion temporarily but can impose net fiscal costs depending on program design. |
| Date: | 2026–05–18 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11385 |
| By: | Mutita Ariyavutikul; Minchung Hsu; Trang Le; Trisukon Sawatrukkiat |
| Abstract: | This paper examines life-cycle patterns of earnings and consumption inequality in a developing economy, focusing on employment informality, risk sharing, and the impacts of the COVID-19 pandemic. Using household survey data from Thailand, with robustness checks for Indonesia and Vietnam, we find that in Thailand both earnings and consumption inequality rise with age during prime working years, and earnings inequality continues to increase after retirement. Inequality patterns differ by employment status: formalworker- headed households show limited risk sharing at younger ages, while informal-worker-headed households display flatter consumption-inequality profiles, with consumption inequality generally below earnings inequality. During the COVID-19 period, overall inequality declined, but consumption inequality increased among younger households. Finally, a standard life-cycle model calibrated to match earnings inequality fails to replicate the observed age profile of consumption inequality, suggesting that key developing-economy features, such as informal insurance mechanisms, are not fully captured. |
| Keywords: | Life-cycle inequality; Risk sharing; Informal employment; Developing economy; COVID-19 crisis |
| JEL: | D31 E21 J46 O15 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:pui:dpaper:251 |
| By: | Yeo Joon Yoon (Pusan National University); Wongi Kim (SUNGSHIN WOMEN'S UNIVERSITY) |
| Abstract: | We analyze how the size and composition of official development assistance (ODA) shape aggregate performance and informality in the Philippines using a small open-economy dynamic general equilibrium model with a formal and informal sector. Two main scenarios are considered: (i) an increase in total ODA and (ii) a higher share of tied aid, given a fixed amount of ODA. Both scenarios raise capital, output, and consumption in steady state, but through distinct mechanisms. The first scenario primarily increases demand and appreciates the relative price of informal goods, expanding informality. By contrast, the second scenario expands public capital, crowds in formal investment, lowers the relative price of informal good, and shifts resources toward the formal sector, despite short-run reallocation costs. |
| Keywords: | Foreign Aid;Official Development Aid;Informal Sector;Philippines;APEC |
| JEL: | E26 O17 O53 |
| Date: | 2025–12–05 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kiepas:022540 |
| By: | Morgandi, Matteo; Alzate, David; Hatayama, Maho |
| Abstract: | The note is divided into three parts. Part One provides a conceptual framework for understanding labor market dynamics and market failures typical of platform work. It then summarizes regulatory responses to these failures based on a review of regulations from middle- and high-income countries. We find that authorities have taken two main regulatory approaches. The first focuses on improving and clarifying the classification of platform workers, with the goal of giving at least some platform workers the opportunity to be treated as formal employees and to enjoy the full package of labor and social protection rights enshrined in the existing legislation. The second, adopted by several middle-income countries, creates special regulations or amends existing labor regulations specifically tailored for platform workers. These tailored regulations provide a more limited set of rights than those granted to formal employees. They are also often crafted after engagement with stakeholders in social dialogue. |
| Date: | 2026–02–28 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:hdnspu:207514 |
| By: | OECD |
| Abstract: | Informal commercialisation of agricultural products is widespread in Colombian food systems. It plays a central role in supporting rural livelihoods and affordable food access, but may limit value creation, create fiscal pressures, and undermine the evidence base for policymaking. This paper examines why small-scale farmers in Colombia rely on informal markets, with particular attention to Afro-Colombian and Indigenous communities. It situates informality within the broader context of rural areas and the structure of the agri-food supply chain. It proposes a characterisation of the main barriers that hinder small-scale farmers’ engagement with formal buyers, drawing on desk research and interviews with government officials, industry stakeholders, community representatives, and academics. It suggests that formal market participation could be facilitated by prioritising the provision of rural public goods, improving data and evidence on informality in food systems, better aligning agricultural policies with producer-financed parafiscal funds, and adopting a demand-driven approach to agricultural policy. |
| Keywords: | Afro-Colombians, Agri-food supply chains, Indigenous, Informality, Small-scale farmers |
| JEL: | O17 Q13 Q18 R11 O54 |
| Date: | 2026–06–15 |
| URL: | https://d.repec.org/n?u=RePEc:oec:agraaa:227-en |
| By: | Andrea Sofía Otero-Cortés; Karina Acosta-Ordoñez; Jhorland Ayala-García; Oriana Álvarez Vos; Sara Rojas |
| Abstract: | Este estudio analiza la evolución de la pobreza y la desigualdad, la estructura demográfica, la composición educativa de la fuerza de trabajo y los principales indicadores de mercado laboral de la población joven en Cartagena entre 2012 y 2024, en comparación con el promedio de la principales ciudades del país. Los resultados muestran que las mujeres jóvenes en Cartagena enfrentan niveles más altos de desempleo e inactividad y también reportan ingresos laborales más bajos en comparación con la población adulta y la población joven de otras ciudades principales. Estas características del mercado laboral cartagenero van de la mano con una incidencia de la pobreza más alta que en el promedio de ciudades capitales del país, la cual no ha retornado a niveles pre-pandemia, aún cuando la ciudad mantiene su estatus como uno de los principales destinos turísticos del país. Esta combinación de resultados, falta de oportunidades laborales bien remuneradas y altos niveles de pobreza, expone a la juventud cartagenera, especialmente a las mujeres, a trabajos de alta exposición al riesgo, al no encontrar en el mercado laboral formal una opción para generar ingresos y construir un proyecto de vida. Los resultados subrayan la necesidad de una atención prioritaria a la dimensión de género en el diseño de políticas públicas en la ciudad. ***ABSTRACT: the workforce, and key labor market indicators among the young population in Cartagena between 2012 and 2024, using a gender perspective. The analysis compares outcomes for Cartagena with the average of the country’s 22 main cities. The results show that young people in Cartagena, defined as individuals who are 18 to 28 years old, and especially young women, face higher levels of unemployment and inactivity, as well as lower labor incomes, compared to the adult population and to young people in other major cities. These local labor market characteristics are associated with a higher incidence of poverty than the national urban average, which has not returned to pre-pandemic levels, despite Cartagena’s status as one of the country’s main tourist destinations and the growth in annual visitor numbers. This combination of limited access to well-paid employment and persistently high poverty levels exposes young people in Cartagena to low-quality jobs, as the formal labor market does not offer sufficient opportunities to generate income and build viable life trajectories. The results highlight the need for priority attention to the gender dimension in the design of public policies in the city. |
| Keywords: | juventud, mercado laboral informal, Ingresos laborales, pobreza, Cartagena, Youth, Informal Labor Markets, Labor income, poverty |
| JEL: | J21 I32 R23 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:bdr:region:344 |