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on Informal and Underground Economics |
| By: | Sanjay Jain |
| Abstract: | While there is general agreement that regulatory avoidance is an important part of firms' decisions to produce in the informal sector, there is much less agreement on how regulation and enforcement affect firms' decisions on, inter alia, which sector they locate in, their employment decisions, and whether to transition from one sector to another. In this paper, we focus on this set of questions: how does the regulatory regime affect these sectoral location decisions by firms? |
| Keywords: | Informal sector, Regulation, Spillovers, Informal work, Regulatory, Output |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2021-123&r= |
| By: | Gomez, M |
| Abstract: | This paper analyses the incidence of job polarization in developing and emerging countries, where a substantial fraction of the urban labor force works in the informal sector. I build a general equilibrium model with informality and endogenous occupational choice. Workers in the informal sector do not pay taxes, are less productive, and have the same ability to perform manual tasks. The analytical solution of the model shows that job polarization, driven by a Routine-Biased Technological Change (RBTC), could lead to a decrease in the share of employment in the informal sector and a reduction in the wage inequality at the bottom of the skill distribution. |
| Keywords: | Informality; Job polarization; Technological change; Wage distribution |
| JEL: | E26 J24 J31 J46 |
| Date: | 2021–05–28 |
| URL: | http://d.repec.org/n?u=RePEc:col:000561:019418&r= |
| By: | Thiago Scarelli (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); David Margolis (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | Frictional labor markets impose a fundamental trade-off: individuals may work on their own at any time, but can only take a potentially better-paid wage job after spending some time looking for it, suggesting that intertemporal considerations affect how people choose their occupation. We formalize this intuition under the job search framework and show that a sufficiently high subjective discount rate can justify the choice for own-account work even when it pays less than wage work. With this simple model, we estimate a lower bound for the discount rate that is implicit in the occupational choice of urban own-accountworkers in Brazil. We find that at least 65% of those workers appear to discount the future at rates superior to those available in the credit market, which suggests constrained occupational choice. Finally, we show that the es- timated time preference lower bound is positively associated with food, clothing, and housing deprivation. |
| Keywords: | Financial constraints,Developing countries,Self-employment,Own-account work,Time discounting,Brazil |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-03288728&r= |
| By: | García-Suaza, A; Gómez, M; Jaramillo, F |
| Abstract: | This paper studies how informality reacts to fiscal policy instruments. We develop an analytical framework with a dual labor market with frictions, where the formal sector, in contrast to the informal sector, produces with technology using capital and pay taxes. We calibrate the model for the Colombian economy and quantify to what extent a decrease in payroll taxes is effective to create formal jobs in a context where government compensates for the reduction in revenues by using other fiscal instruments, such as reducing expenditure or increasing other taxes, e.g., consumption or capital income taxes. |
| Keywords: | Informality; occupational choice; payroll taxes; fiscal policy |
| JEL: | E24 E62 J01 J21 J32 |
| Date: | 2021–06–28 |
| URL: | http://d.repec.org/n?u=RePEc:col:000561:019416&r= |
| By: | Pedro A. Cabra-Acela |
| Abstract: | In this paper, I examine the conditions under which rewarding honest taxpayers is an optimal mechanism to reduce tax evasion and improve collection. My theoretical model suggests that when it is expensive to audit contributors, and moral (or pecuniary) evasion cost is high enough, rewarding tax compliance is an effective strategy to increase collection. I provide empirical evidence from Argentina’s province variation of rewards policies and tax collection. Where the data suggests that theoretical conditions hold, I find a positive effect in real estate per capita tax collection between 0.4 and more than 2 standard deviations. |
| Keywords: | Tax evasion, good taxpayer, rewards, fiscal policy, Argentina. |
| JEL: | H21 H26 H30 |
| Date: | 2021–07–09 |
| URL: | http://d.repec.org/n?u=RePEc:col:000089:019419&r= |
| By: | Antinyan, Armenak (Cardiff Business School, Cardiff University.); Asatryan, Zareh (ZEW Mannheim); Dai, Zhixin (China Financial Policy Research Center, School of Finance, Renmin University of China); Wang, Kezhi (Shanghai Municipal Tax Service, State Taxation Administration) |
| Abstract: | We assess the impact of reminder frequency on the probability of paying overdue property taxes in a randomized controlled trial in China. One reminder a week (sent as a text message) considerably increases the probability of tax compliance and results in tangible fiscal gains compared to a one-off reminder. However, increasing the frequency of reminders to two text messages a week diminishes their effectiveness. The takeaway of our study is that frequent reminders are an important trigger for human behavior, nonetheless, beyond a certain frequency the effectiveness of additional reminders seems to decline. |
| Keywords: | Reminder Frequency; Randomized Controlled Trial; Tax Compliance |
| JEL: | C93 H24 H26 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2021/17&r= |
| By: | Coy, F; Pacheco, J; Peralta, M; Saavedra, S; Llanes, Y |
| Abstract: | Más del 60% de los trabajadores en el mundo se encuentra en el sector informal. En el caso de la minería, la informalidad no sólo representa ausencia de prestaciones sociales y pago de impuestos. También existen externalidades ambientales, conflictos sociales y riesgos laborales. En este documento presentamos estadísticas descriptivas de una encuesta realizada a mineros en Colombia. Encontramos que las minas formales reciben en promedio un precio de venta 30% más alto que las informales. Con este diferencial estimamos que los costos de formalización se recuperan en 2 a 4 años aproximadamente . De hecho, el 80% de los mineros consideran rentable formalizarse, pero solo la mitad lo ha intentado. A pesar de los beneficios económicos, los mineros mencionan barreras administrativas por parte del gobierno que impiden la formalización. |
| Keywords: | Minería; Informalidad; Colombia |
| JEL: | E26 L72 O17 |
| Date: | 2021–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:col:000561:019417&r= |