|
on Informal and Underground Economics |
| By: | Blaufus, Kay; Braune, Matthias; Hundsdoerfer, Jochen; Jacob, Martin |
| Abstract: | Previous research argues that law expresses social values and could, therefore, influence individual behavior independently of enforcement and penalization. Using three laboratory experiments on tax avoidance and evasion, we study how legality affects individuals' decisions. We find that, without any risk of negative financial consequences, the qualification of tax minimization as illegal versus legal reduces tax minimization considerably. Legislators can thus, in principle, affect subjects' decisions by defining the borderline between legality and illegality. However, once we introduce potential negative financial consequences, legality does not affect tax minimization. Only if we use moral priming to increase subjects' moral cost do we again find a legality effect on tax minimization. Overall, this demonstrates the limitations of the expressive function of law. Legality appears to be an important determinant of behavior only if we consider activities with no or low risk of negative financial consequences or if subjects are morally primed. |
| Keywords: | Expressive Law,Legality,Moral Appeals,Tax Avoidance,Tax Evasion,Real Effort Experiment |
| JEL: | M41 M48 H20 H30 Z18 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:arqudp:193&r=all |
| By: | Almunia, Miguel (Department of Economics and CAGE University of Warwick); Lopez-Rodriguez, David (Banco de España) |
| Abstract: | This paper analyzes the effects on tax compliance of monitoring the information trails generated by firms’ activities. We exploit quasi-experimental variation generated by a Large Taxpayers Unit (LTU) in Spain, which monitors firms with more than 6 million euros in reported revenue. Firms strategically bunch below this threshold in order to avoid stricter tax enforcement. This response is stronger in sectors where transactions leave more paper trail, implying that monitoring effort and the traceability of information reported by firms are complements. We calculate that there would be substantial welfare gains from extending stricter tax monitoring to smaller businesses. |
| Keywords: | tax enforcement ; firms ; bunching ; Spain ; Large Taxpayers Unit (LTU) |
| JEL: | H26 H32 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1070&r=all |
| By: | P. Buonanno; P. Vanin |
| Abstract: | This paper studies the effect of social closure on crime and tax evasion rates using disaggregated data for Italian municipalities. It measures the degree of social openness of a community by the diversity of its surname distribution, which reflects the history of migration and inbreeding. It shows that, all else equal, communities with a history of social closure have lower crime rates and higher tax evasion rates than more open communities. The effect of social closure is likely to be causal, it is relevant in magnitude, statistically significant, and robust to changes in the set of included controls, in the specific measures of dependent and independent variables, in the specification of the regression equation, and in the possible sample splits. Our findings are consistent with the idea that social closure strengthens social sancions and social control, thus leading to more cooperative outcomes in local interactions, but it reduces cooperation on a larger scale. |
| JEL: | A14 K42 Z13 |
| Date: | 2015–10 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp1032&r=all |
| By: | TANSEL, Aysit; Keskin, Halil Ibrahim; Ozdemir, Zeynel Abidin |
| Abstract: | This paper considers the private sector wage earners in Egypt and examine their wage distribution during 1998-2012 using Egyptian Labor Market Panel Survey. We first estimate Mincer wage equations both at the mean and at different quantiles of the wage distribution taking into account observable characteristics. Then we make use of the panel feature of the data and estimate models taking into account unobservable characteristics. We also consider the possibility of nonlinearity in covariate effects and estimate a variant of matching models. In all cases we find a persistent informal wage penalty in the face of extensive sensitivity checks. It is smaller when unobserved heterogeneity is taken into account and larger at the top than at the bottom of the conditional wage distribution. We also examine the informal wage penalty over time during the study period and in different groups according to experience and education. The informal wage penalty has increased recently over time and is larger for the better educated but smaller for the more experienced. |
| Keywords: | Formal and informal wage gap; Formal and informal employment; Panel data; Egypt. |
| JEL: | J3 J31 |
| Date: | 2015–10–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:67051&r=all |
| By: | Andrew Kerr (DataFirst and SALDRU, University of Cape Town) |
| Abstract: | In this paper I describe the monetary and time costs of commuting to work in South Africa. I find that these costs are high and that monetary costs of commuting have increased faster than inflation, mainly through a shift away from walking and towards minibus taxis and driving. Journey times are substantially higher than the OECD country average. Using a method suggested by Hausmann (2013) I estimate the effective tax on hourly earnings that the time and monetary costs of commuting impose. I find high effective tax rates, which are a disincentive to working far from home. This only deepens the puzzle of why South Africa's informal sector is so small, since more than half of the informally self-employed work at home and pay no transport costs. I show that whilst minibus taxis conveyed around 71% of commuters that used public transport in 2013, the industry receives less than 1% of the direct public transport subsidy provided by the South African government. I find that the subsidy accrues mainly to bus and train users in the lower middle part of the labour income distribution. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ldr:wpaper:156&r=all |