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on Informal and Underground Economics |
| By: | Emilio Colombo; Davide Furceri; Pietro Pizzuto; Patrizio Tirelli |
| Abstract: | This paper investigates the role of informality in affecting the magnitude of the fiscal multiplier in a panel of 141 countries, using the local projections method. We find a strong negative relationship between the degree of informality and the size of the fiscal multiplier. This result holds irrespective of the levels of economic development and institutional quality and is robust to additional country characteristics such as trade, financial openness and exchange rate regime. In a two-sector new-Keynesian model, we rationalize this result by showing that fiscal shocks raise the relative price of official goods, shifting demand towards the informal sector. This reallocation effect increases with the level informality, because a larger informal sector is associated with a stronger appreciation of relative prices in response to fiscal shocks. Thus, informality raises the size of the unofficial multiplier. A higher degree of non-separability between public and private goods also contributes to rationalize the lower multipliers in high-informality countries. |
| JEL: | H30 H50 E26 C32 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:dis:wpaper:dis2201&r= |
| By: | Matteo Bobba (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics); Luca Flabbi (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics); Santiago Levy (UNC - University of North Carolina [Chapel Hill] - UNC - University of North Carolina System) |
| Abstract: | We develop a search and matching model where matches (jobs) can be formal or informal. Workers choose their level of schooling and search for an employee job either as unemployed or as self-employed. Firms post vacancies in each schooling market, decide the formality status of the job, and bargain with workers over wages. The resulting equilibrium size of the informal sector is an endogenous function of labor market and institutional characteristics. We estimate the model parameters using labor force survey data from Mexico and the exogenous variation induced by the roll-out of a non-contributory social program. Counterfactual experiments based on the estimated model show that eliminating informal jobs increases schooling investments but at the cost of decreasing welfare for both workers and firms. |
| Keywords: | Labor market frictions,Search and matching,Nash bargaining,Informality,Returns to schooling |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03641810&r= |
| By: | H. Xavier Jara; Pia Rattenhuber |
| Abstract: | Low- and middle-income countries face a trade-off between raising tax revenue to strengthen social protection and creating incentives for the population to enter formal employment. However, empirical evidence on labour supply elasticities in the presence of informal employment remains scarce. This paper analyses female labour supply behaviour and the choice between formal and informal employment in Ecuador, a middle-income country characterized by persistent levels of informal employment particularly among women. |
| Keywords: | Labour supply, Informal work, Tax-benefit policy, Ecuador, female labour supply, Informality |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2022-47&r= |
| By: | Ghulam Nabi (Pakistan Institute of Development Economics) |
| Abstract: | Tax revenue to GDP share varies across the globe depending on the capacity of the revenue authority of a government, with the world’s developed economies having a substantially higher capacity to collect a higher share of tax revenue (Besley and Person, 2014). Fiscal experts observe low compliance of taxes, where many people and businesses easily escape from the tax net in developing countries. Consequently, people do not voluntarily participate (evade taxes), or if they do, they reduce their taxable liabilities (tax avoidance). As they are operating in an undocumented sector, thanks to the lack of book-keeping or any other sources for internal or external audit by the revenue authorities. This reflects both hard-to-tax sectors; this includes a subset of economic activities where the tax compliance is problematic and needs to be increased and enhancing the revenue collecting authorities’ capacity to develop a more buoyant method of collecting desired revenues. |
| Keywords: | FBR, POS, Integration, Digitalisation, Business Transactions, |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:pid:kbrief:2022:64&r= |