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on Informal and Underground Economics |
| By: | Francesco Pappadà; Kenneth S. Rogoff |
| Abstract: | This paper offers a new approach to measuring the size of the informal economy based on VAT data for the European Union. Although data intensive, our EVADE measure is simpler and more transparent than existing measures. EVADE also shows more variation across countries of Europe than earlier measures, including higher informality in Greece, Italy and Spain, for example. Moreover, we find considerably higher variation within countries across time; in a cross-country time series regression, controlling for tax rates, we confirm that the informal economy grows significantly in recessions and decreases in booms, which we term the “Hugo effect”. |
| JEL: | E26 E32 H26 O17 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31963&r=iue |
| By: | KOUAKOU, Dorgyles C.M.; YEO, Kolotioloma I.H. |
| Abstract: | A substantial body of literature has examined the determinants of the informal economy. However, this literature has predominantly focused on proximate causes, such as unemployment and taxation, while largely overlooking the role of innovation. This paper contributes to filling this gap by studying the impact of innovation production on the size of the informal economy using a sample of 138 countries, spanning the period from 2007 to 2018. Estimations, based on the entropy balancing method for continuous treatments, demonstrate that innovation reduces the size of the informal economy, emphasizing the importance of innovation policies in addressing informality. This result remains robust across a wide array of controls, alternative estimation techniques, restricted samples, and different measures of both the informal economy and innovation. The study identifies economic development, domestic credit mobilization, and e-government as channels through which innovation influences the informal economy. Potential government policies are explored. |
| Keywords: | Informal economy; Innovation; Economic development; Domestic credit mobilization; E-government; Entropy balancing |
| JEL: | O11 O17 O31 O38 |
| Date: | 2023–10–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119264&r=iue |
| By: | Gracy Mungosy Tsongo (Université de Goma); Anselme Paluku Kitakya (Université de Goma); Rodrigue Muhindo Kalere (Université de Goma) |
| Abstract: | Informality is an obstacle to economic development. Liberal authors associate it with clandestine operations carried out with the aim of evading public regulations, the costs of which are considered exorbitant. This paper aims to examine the effects of fiscal pressure on the size of the informal economy in Sub-Saharan Africa. To better achieve this objective, an empirical approach was adopted on a panel of 30 countries in this region over the period 2000-2017. The variables of tax pressure and informality were measured respectively by an intuitive indicator, i.e. the ratio of tax revenue to GDP, and by the size of the informal economy as a percentage of GDP observed on the basis of the multiple indicators multiple causes model (MIMIC). The estimates were carried out using a dynamic panel model by the system generalized method of moments and reveal the existence of positive effects of the tax pressure on informality. These effects are much more pronounced in low-income countries than in middle-income countries in the robustness checks of different income groups. In these countries, the informal sector is characterized by small production units with low sales. Excessive tax regulations suffocate these entrepreneurs, who prefer to remain in the informal sector or take refuge in it because of the complexity of procedures and tax harassment. The ensuing economic policy implications concern, on the one hand, the stimulation of aggregate demand by governments, by prioritizing social spending to enable businesses to increase their production levels and obtain consistent profits that will enable them to bear the tax burden, and on the other hand, the simplification of registration procedures, the reduction of formalization costs and the digitization of the tax collection process. |
| Abstract: | Résumé L'informalité constitue une entrave au développement économique. Les auteurs d'obédience libérale l'associent aux opérations clandestines menées dans le but d'échapper aux réglementions publiques dont les coûts sont jugés exorbitants. Le présent article examine les effets de la pression fiscale sur la taille de l'économie informelle en Afrique sub-saharienne. Pour mieux atteindre cet objectif, il a été adopté une démarche empirique sur un panel de 30 pays de cette région sur la période 2000-2017. Les variables pression fiscale et informalité ont été mesurées respectivement par l'indicateur intuitif de la pression fiscale en l'occurrence le ratio recettes fiscales/PIB et par la taille de l'économie informelle en pourcentage du PIB observée sur base du modèle MIMIC (multiple indicators multiple causes model). Les estimations ont été réalisées à l'aide d'un modèle de panel dynamique par la méthode des moments généralisés en système et révèlent l'existence des effets positifs de la pression fiscale sur l'informalité. Grâce au test de robustesse, il est établit que ces effets sont beaucoup plus prononcés dans les pays à faibles revenus que dans ceux à revenus intermédiaires. Dans ces pays, le secteur informel est caractérisé par des petites unités de production ayant un faible niveau de chiffre d'affaires. La règlementation fiscale excessive entraine l'asphyxie de ces entrepreneurs qui préfèrent demeurer dans l'informel ou s'y réfugier à la suite de la complexité des procédures et aux tracasseries fiscales. Les implications de politiques économiques qui en découlent concernent d'une part la stimulation de la demande globale par les Etats en priorisant les dépenses à caractère social afin de permettre aux entreprises d'accroitre leur niveau de production, d'obtenir des bénéfices consistants qui les rendront capables de supporter les charges fiscales et d'autre part la simplification des procédures d'enregistrement, l'allégement des coûts de formalisation et la numérisation du processus de recouvrement fiscal. Mots clés : Informalité, Pression fiscale, Méthode des Moments Généralisés, Afrique subsaharienne. Classification JEL : H32 Type de l'article : Recherche appliquée Abstract Informality is an obstacle to economic development. Liberal authors associate it with clandestine operations carried out with the aim of evading public regulations, the costs of which are considered exorbitant. This paper aims to examine the effects of fiscal pressure on the size of the informal economy in Sub-Saharan Africa. To better achieve this objective, an empirical approach was adopted on a panel of 30 countries in this region over the period 2000-2017. The variables of tax pressure and informality were measured respectively by an intuitive indicator, i.e. the ratio of tax revenue to GDP, and by the size of the informal economy as a percentage of GDP observed on the basis of the multiple indicators multiple causes model (MIMIC). The estimates were carried out using a dynamic panel model by the system generalized method of moments and reveal the existence of positive effects of the tax pressure on informality. These effects are much more pronounced in low-income countries than in middle-income countries in the robustness checks of different income groups. In these countries, the informal sector is characterized by small production units with low sales. Excessive tax regulations suffocate these entrepreneurs, who prefer to remain in the informal sector or take refuge in it because of the complexity of procedures and tax harassment. The ensuing economic policy implications concern, on the one hand, the stimulation of aggregate demand by governments, by prioritizing social spending to enable businesses to increase their production levels and obtain consistent profits that will enable them to bear the tax burden, and on the other hand, the simplification of registration procedures, the reduction of formalization costs and the digitization of the tax collection process. Keywords: Informality, Tax Pressure, Generalized Method of Moment, Sub-Saharan Africa. JEL Classification: H32 Paper type: Empirical research |
| Keywords: | Informality Tax Pressure Generalized Method of Moment Sub-Saharan Africa. JEL Classification: H32 Paper type: Empirical research, Informality, Tax Pressure, Generalized Method of Moment, Sub-Saharan Africa. JEL Classification: H32 Paper type: Empirical research |
| Date: | 2023–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04315661&r=iue |
| By: | Irene Selwaness (Cairo University); Ghada Barsoum (AUC) |
| Abstract: | This paper examines the extent to which the institutional framework for social insurance (SI) might constrain access to contributory schemes and explain workers’ coverage gaps. We use nationally representative microdata from Egypt to test how the design leads to the exclusion of specific categories of workers. We show that the legal framework for SI allows certain types of workers (the self-employed and employers in unregistered enterprises) to opt out of the SI system, thus legalizing and legitimating employment informality. Although the law explicitly highlights the objective of including informal workers, the difficulty of the required documentation and the focus on specific occupations show that it fails to recognize the diversity of this group. Our findings also show that the lack of SI coverage happened even among workers who should be covered by law, i.e., regular wage workers, due to the substantial increases in the minimum insurable wage upon which contributions are calculated, rendering the scheme less attractive for both employers and employees. The paper demonstrates that the conditions of enrollment, cost, and benefit design for SI schemes disincentivize both employers and employees from contributing to the system |
| Date: | 2023–11–20 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:1661&r=iue |
| By: | Aronsson, Thomas (Department of Economics, Umeå University); Xu, Fei (Department of Economics, Umeå University) |
| Abstract: | This paper is the first to integrate corruption with respect to tax collection in a Mirrleesian model of optimal redistributive taxation. The analysis starts with a simple two-type model, showing that the optimal marginal tax structure resembles that of the original Stiglitz (1982) model, albeit for different reasons. We also extend the analysis to a framework with many types and present policy rules for marginal taxation over the whole ability distribution. The marginal income tax rates are all non-negative and can be expressed in terms of two key determinants: the distributional weights attached to taxpayers, and how the private cost to evade taxes varies with the taxpayers’ income. Finally, we consider the role of government expenditures directly targeting the incentives of the tax collector, such that these public expenditures and the optimal tax structure are implemented simultaneously. |
| Keywords: | Redistribution; taxation; corruption |
| JEL: | D73 H21 H26 |
| Date: | 2023–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:umnees:1020&r=iue |
| By: | James Alm (Tulane University) |
| Abstract: | How can tax policy â and other government policies â serve as a tool to promote âdistributive tax justiceâ? In this paper, I briefly discuss the many tax reform proposals that have been proposed by many others for the specific case of the United States. I then focus on a set of specific U.S. tax reforms that are, I believe, both feasible and effective in achieving distributive tax justice. If implemented, these policies would increase the taxes paid by the rich, reduce tax evasion by the rich, and decrease the tax burdens by the gender, race, and ethnicity of taxpayers, all of which would lead to what I believe would be a fairer (and a more productive) tax system. I also argue that these policies apply in some form to most other countries around the world. My basic themes are that tax changes must be feasible and effective rather than simply aspirational but that even within this somewhat limiting framework much can be done. Specifically, these policies all work through existing taxes, they are are all administratively (if not necessarily politically) feasible and effective, none of these policies raise statutory marginal tax rates, these policies are all broadly consistent with the standard âBroad Base, Low Rateâ approach to tax reform, and variants of all of these policies apply world-wide. |
| Keywords: | Distributive tax justice, inequality, tax reform, tax compliance |
| JEL: | H2 H26 D91 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:tul:wpaper:2307&r=iue |
| By: | - |
| Abstract: | El presente documento constituye la memoria del Tercer Seminario Regional de Desarrollo Social “Promover la inclusión laboral como una forma de superar las desigualdades y la informalidad en América Latina y el Caribe”. Este seminario fue organizado por la División de Desarrollo Social de la Comisión Económica para América Latina y el Caribe (CEPAL) en el marco de la colaboración con la Organización Internacional del Trabajo (OIT) y del trabajo conjunto con el Gobierno de Noruega, la Fundación Ford, y la Cooperación Alemana, y se llevó a cabo entre los días 27 y 29 de junio de 2023. En su tercera versión, el Seminario Regional se centró en brindar un espacio de diálogo, reflexión e intercambio de experiencias sobre las políticas de inclusión laboral como una forma de superar las desigualdades y la informalidad en América Latina y el Caribe. El seminario contó con la participación de representantes de gobierno de 12 países de América Latina y el Caribe, incluyendo a 10 ministras y ministros del trabajo de países de la región, así como representantes del mundo empresarial y sindical, profesores e investigadores de reconocida trayectoria, y profesionales y técnicos de organismos internacionales, tales como la Organización Internacional del Trabajo (OIT), el Banco Interamericano de Desarrollo (BID) y la Organización para la Cooperación y el Desarrollo Económicos (OCDE). |
| Date: | 2023–12–27 |
| URL: | http://d.repec.org/n?u=RePEc:ecr:col043:68783&r=iue |
| By: | Pistorio Mariela |
| Abstract: | En abril de 2016, Argentina implementó una extensión del régimen de asignaciones familiares a aquellos individuos que trabajaban bajo el régimen tributario simplificado (vulgarmente conocido como monotributo). Potencialmente, esta política podría haber generado incentivos para que individuos hasta entonces trabajando en la informalidad, se transformasen en monotributistas. Este trabajo estima ese efecto utilizando como grupo tratamiento a los trabajadores informales con hijos, y como control a un grupo comparable pero no elegible, al no tener hijos menores de edad. Los resultados muestran un efecto positivo y significativo para el caso general. Asimismo, se encuentra evidencia de efectos heterogéneos, siendo el efecto particularmente significativo para hombres y jefes de hogar. Por su parte, no se encuentra evidencia de que la medida haya generado incentivos a que trabajadores en relación de dependencia se vuelquen hacia el monotributo. |
| JEL: | H31 J46 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:aep:anales:4683&r=iue |
| By: | Paula Carrasco (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Mathías Fondo (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Cecilia Parada (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía) |
| Abstract: | This paper analyses the evolution of the main variables of the Uruguayan labour market from 2016 to 2022, a period marked by economic challenges. It shows initial growth with a slowdown and a sharp contraction in 2020 due to the Covid-19 pandemic. Thus, labor market indicators have worsened since 2016 and continued to do so after 2019. As of 2021, the economy showed improvements in labor market indicators. During this period, the labour force participation rate declined, especially for men and the less educated. Labour demand decreased, and although it began to recover in 2021, it did not reach pre-pandemic levels Unemployment increased, affecting men and women, young and old, with a deteriorating labour market, but reached pre-2020 levels in 2022. Employment formality is stabilising at a lower level than in 2016, and this study essay some hypotheses associated with this phenomenon. Real wages stagnated and then declined, impacting both formal and informal workers. In sum, the Uruguayan labour market faced difficulties during this period, including the pandemic, which negatively affected labour market indicators, especially labour income. |
| Keywords: | labour market, Uruguay, labour income |
| JEL: | J01 J08 J3 |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:ulr:wpaper:dt-17-23&r=iue |