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on Informal and Underground Economics |
| By: | Alban Asllani; Roberto Dell'Anno; Friedrich Schneider |
| Abstract: | Using an enhanced MIMIC method, this paper presents new estimates of the Informal Economy (IE) for 110 countries from 1997 to 2022. We address several limitations found in previous estimates of the IE, notably issues surrounding the missing values, time-invariant country characteristics, and calibration issues with exogenous variables. We enhance the MIMIC model by including fixed effects for country-specific characteristics of IE, thereby providing more reliable estimates. Our findings show a significant variation in the key drivers of IE between high-income and not-high-income countries, exhibiting distinct causal effects on the IE depending on different economic developments. In terms of normative implications, our results highlight the need for specific and tailored policies in dealing with the formalisation of informal activities in countries with different levels of income. |
| Keywords: | informal economy, shadow economy, structural equation modelling, MIMIC approach |
| JEL: | O17 C39 H26 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11416 |
| By: | Dorgyles C.M. Kouakou (Univ Rennes, CNRS, CREM – UMR6211, F-35000 Rennes France) |
| Abstract: | This paper contributes to the literature on the effects of informal firms on the operations of registered firms at three levels. First, we provide the first global evidence on the causal effect of competition from informal firms – referred to as informal competition – on the credit constraints faced by registered firms. Using a large firm-level dataset from the World Bank Enterprise Surveys, covering 145 countries and over 141, 000 observations, and employing the instrumental variable method to address the endogeneity of informal competition, we find that registered firms competing against informal firms are significantly more likely to be credit-constrained than those that do not. This result holds after controlling for economic development, financial development, economic conditions, and the institutional environment across different countries, regardless of firm size and sector, and it remains robust across a variety of robustness tests. Evidence from Sub-Saharan Africa and Latin America and the Caribbean indicates that the effect of informal competition is stronger in these regions than in the rest of the world. Second, we show that the impact of informal competition diminishes with higher financial development and firm productivity. Third, we demonstrate that self-financing capacity, capacity utilization, and informal payments are key channels through which informal competition exacerbates credit constraints for registered firms. |
| Keywords: | nformal competition; Formal-informal linkages; Credit constraints; Productivity; Financial development; Transmission channels |
| JEL: | D24 G20 O12 O16 O17 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:tut:cremwp:2024-10 |
| By: | Meling, Tom (Ohio State U); Mogstad, Magne (U of Chicago); Vestre, Arnstein (U of Chicago) |
| Abstract: | We quantify the extent of crypto tax noncompliance and evasion, and assess the efficacy of alternative tax enforcement interventions. The context of the study is Norway. This context allows us to address key measurement challenges by combining de-anonymized crypto trading data with individual tax returns, survey data, and information from tax enforcement interventions. We find that crypto tax noncompliance is pervasive, even among investors trading on exchanges that share identifiable trading data with tax authorities. However, since most crypto investors owe little in crypto-related taxes, enforcement strategies need to be well-targeted or cheap for benefits to outweigh costs. |
| JEL: | G10 G50 H20 H26 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:ecl:ohidic:2024-13 |
| By: | Josep Pijoan-Mas (CEMFI AND CEPR); Pau Roldan-Blanco (BANCO DE ESPAÑA, CEMFI AND UNIVERSIDAD AUTÓNOMA DE BARCELONA) |
| Abstract: | We study the effects of dual labor markets (i.e. the co-existence of fixed-term and open-ended contracts) on the allocation of workers within and across firms, the equilibrium distribution of firms, aggregate productivity, and welfare. Using rich Spanish administrative data, we document that the use of fixed-term contracts is very heterogeneous across firms within narrowly defined sectors. In particular, there is a strong relationship between the share of temporary workers and firm size, which is positive when looking at within-firm variation but negative when looking at the variation between firms. To explain these facts, we use a directed search model of multi-worker firms, with ex-ante firm heterogeneity in technology types, and ex-post firm heterogeneity in transitory productivity, the composition of employment by contract type (fixed-term or open-ended) and human capital accumulated on the job. In counterfactual exercises, we find that limiting the use of fixed-term contracts decreases the share of temporary employment and increases aggregate productivity, but it also reduces total employment and leads to an overall decline in total output and welfare. The increase in productivity comes from an improved selection of firms, which more than offsets an increased misallocation of workers across firms. |
| Keywords: | dual labor markets, temporary contracts, firm dynamics, unemployment |
| JEL: | D83 E24 J41 L11 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2442 |