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on Informal and Underground Economics |
| By: | Asllani, Alban (University of East London); Dell'Anno, Roberto (University of Salerno); Schneider, Friedrich (University of Linz) |
| Abstract: | Using an enhanced MIMIC method, this paper presents new and long-run estimates of the Informal Economy (IE) for 152 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 and long-run estimates. This approach allows us to control for time-invariant effects across countries by incorporating fixed effects through a transformation of observed variables, thereby holding constant both observable causes and unobserved structural factors unique to each country. 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: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17557 |
| By: | James Alm (Department of Economics, Tulane University, New Orleans, LA USA); Zehra Farooq (Federal Board of Revenue, Ministry of Finance, Federal Government of Pakistan, Islamabad, Pakistan) |
| Abstract: | When discussing local government taxation in developing countries, it is impossible to avoid the conclusion that most all local governments in most all developing countries around the world simply fail to collect taxes in amounts sufficient to provide desired and needed government services. What accounts for this failure? And what can be done to address this failure? It is these two basic questions what we seek to address Ð if not necessarily to answer Ð here. Our first conclusion is an obvious and well-known one: the main reason for low tax collections is that local governments in developing countries have been assigned largely unproductive tax sources, taxes that are often difficult to administer, lack buoyancy, and allow little discretion to local governments. Our second conclusion may seem less obvious and in fact is driven largely by results from the tax compliance literature: tax collections, especially property tax collections, can be increased by local government policy initiatives that increase tax compliance by improving citizen trust in government, and these initiatives can be implemented quickly and effectively in many if not all settings. In the process we also discuss several other dimensions of local taxation in developing countries. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:ays:ispwps:paper2406 |
| By: | François Vaillancourt |
| Abstract: | This paper presents evidence on the evolution of both the complexity of the personal income tax system and the compliance costs incurred by personal income tax filers(PIT) in Canada. The complexity is measured using three indicators: ;length of federal income tax code(1971-2018), number of federal PIT expenditures(1981-2014) and length of PIT forms (2000-2015) .All three indicators show an increase in complexity. The compliance costs of the PIT are calculated using survey information gathered from individual canadians on time expanded and amount spent the following year for the 1985, 2007, 2018 and 2022 tax filing /calendar years. Our results show a decrease in the PIT compliance costs in hours, in total value and as share of GDP and revenues collected. This drop compliance costs is most likely due to the increasing use of software by tax filers to prepare their tax returns; this allows them, amongst other things, to download information from the Revenue agencies. A tax pain index combining complexity and compliance costs is put forward ; its small growth over time may well explain why increasing tax complexity of the PIT in Canada is apparently well tolerated. Cet article présente des résultats sur l'évolution de la complexité du système d'impôt sur le revenu des particuliers et des coûts de conformité encourus par les déclarants de l'impôt sur le revenu des particuliers (IRP) au Canada. La complexité est mesurée à l'aide de trois indicateurs : la longueur du code fédéral des impôts sur le revenu (1971-2018), le nombre de dépenses fédérales PIT (1981-2014) et la longueur des formulaires PIT (2000-2015). Les trois indicateurs montrent une augmentation de la complexité. Les coûts d'observation de l'IRP sont calculés à l'aide de données d'enquête recueillies auprès de particuliers canadiens sur le temps passé et le montant dépensé l'année suivante pour les années civiles/de déclaration de revenus 1985, 2007, 2018 et 2022. Nos résultats montrent une diminution des coûts de conformité associés avec l’IRP en heures, en valeur totale et en part du PIB et des revenus collectés. Cette baisse des coûts de conformité est très probablement due à l'utilisation croissante de logiciels par les déclarants pour préparer leurs déclarations de revenus ; cela leur permet, entre autres, de télécharger des informations auprès des agences fiscales. Un indice de ‘’douleur’’ fiscale combinant complexité et coûts de conformité est proposé ; sa faible croissance au fil du temps pourrait bien expliquer pourquoi la complexité fiscale croissante de l’IRP au Canada est apparemment bien tolérée. |
| Keywords: | Tax complexity, compliance costs, personal income tax, Canada, Complexité fiscale, coûts de conformité, impôt sur le revenu personnel, Canada |
| JEL: | H20 H24 H29 |
| Date: | 2024–12–09 |
| URL: | https://d.repec.org/n?u=RePEc:cir:cirwor:2024s-13 |
| By: | Jirjahn, Uwe |
| Abstract: | This article reviews quantitative research on unions and collective bargaining in Sub-Saharan Africa. It discusses the consequences of unions for wages, inequality, economic performance and employer-employee relations. The article also highlights the role of unions in society, a role that goes beyond the economic sphere. Moreover, the article discusses evidence on how the specific situation in Sub-Saharan Africa influences unionization and collective bargaining. The informal sector, ethnic divide and globalization entail serious threats to workers' unionization. The increasing influence of China and neoliberal policy prescriptions by the International Monetary Fund and the World Bank are challenging factors, too. |
| Keywords: | Africa, Industrial Relations, Political Spillover, Informal Sector, Ethnic Diversity, Globalization |
| JEL: | J51 J52 F66 O10 O55 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1550 |
| By: | Anikó Bíró (Institute for Fiscal Studies); Péter Elek (Institute for Fiscal Studies); Dániel Prinz (Institute for Fiscal Studies); László Sándor (Institute for Fiscal Studies) |
| Date: | 2024–12–18 |
| URL: | https://d.repec.org/n?u=RePEc:ifs:ifsewp:24/57 |
| By: | Jaylson Jair da Silveira; Gilberto Tadeu Lima; Leonardo Barros Torres |
| Abstract: | There is considerable empirical evidence that heterogeneity in tax compliance behavior is persistent and pervasive. This paper develops an evolutionary analytical framework in which taxpayers periodically choose between to comply or not to comply with their tax obligations. Aggregate demand formation arising from private and public expenditures depends on the frequency distribution of tax compliance behavior across taxpayers, so that the macrodynamic of the rates of capacity utilization and output growth is coevolutionarily coupled to the microdynamic of tax compliance across individuals. The analytical framework set forth here replicates several pieces of evidence on tax evasion. First, the proportion of non-complying taxpayers (and hence the volume of tax evasion) depends on the tax rate and the expected cost of tax evasion. Second, heterogeneity in tax compliance behavior is evolutionarily persistent instead of temporary. Third, the immediate impact of a change in the proportion of tax evading individuals on the rates of capacity utilization and output growth is non-linear. Fourth, the proportion of non-complying taxpayers and the rates of capacity utilization and output growth vary positively with the tax rate in the evolutionary equilibrium. |
| Keywords: | Tax evasion; evolutionary dynamics; heterogeneous behavior; capacity utilization; economic growth |
| JEL: | B52 C73 E12 E70 H26 |
| Date: | 2025–01–07 |
| URL: | https://d.repec.org/n?u=RePEc:spa:wpaper:2025wpecon1 |
| By: | Adjisse, Sossou; Blimpo, Moussa P.; Castañeda Dower, Paul |
| Abstract: | Balán et al. (2022) evaluate the impact of "local elites" involvement in local tax collection in a large city in the Democratic Republic of Congo. Using a randomized controlled trial to vary the identities of tax collectors, they find that local elites' involvement raises tax compliance and total revenue by 50 and 44 percent, respectively. The paper argues that the primary mechanism behind the results is better targeting made possible by local elites' superior information about property holders' willingness and ability to pay. In this replication comment, we first reproduce the paper's main results. Then, we assess the robustness of the results by (1) employing randomization inference for statistical tests; (2) controlling for baseline characteristics that are not balanced; and (3) using an alternative method to examine the claims supporting the preferred mechanism of better targeting. We find robust estimates in (1). However, the results are less robust both in terms of statistical significance and magnitude for (2) and (3). We conclude that the average treatment effect is robust, while the main claim about mechanisms, the information channel, is less robust to alternative estimation approaches. We contextualize and discuss the significance of these results, including the negligible revenue potential even under full compliance. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:i4rdps:191 |
| By: | Gabriel Espi-Sanchis (SALDRU, University of Cape Town); Murray Leibbrandt (African Centre of Excellence for Inequality Research, University of Cape Town, South Africa); Vimal Ranchhod (SALDRU, University of Cape Town) |
| Abstract: | This chapter engages with the issue of labour regulation in Sub-Saharan Africa, describing variation in regulatory regimes and discussing how well they align with the realities and needs of different countries’ labour markets. We review evidence on the historical origins of regulation and how it has persisted over time, and map the contemporary prevalence of different forms of regulation. The connection between this regulation and countries’ employment contexts is then discussed, focusing on the issues of compliance and the effects of labour regulation. This discussion is informed by the use of three case studies with contrasting legal histories and employment contexts: Ghana, South Africa and Senegal. Despite the vast majority of employment being informal in most SSA countries, we find that much regulation still revolves around the formally employed. We argue that regulation needs to be more tailored around the particular characteristics of each country’s labour market. |
| Keywords: | Labour regulation, labour policy, Sub-Saharan Africa, informal employment |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ldr:wpaper:308 |
| By: | Zaakhir Asmal; Haroon Bhorat; Alexia Lochmann (Center for International Development at Harvard University); Lisa Martin; Kishan Shah (Center for International Development at Harvard University) |
| Abstract: | This paper argues that South Africa's persistently high unemployment is in part explained by abnormally low levels of informal sector activity compared to other developing countries. Using cross-country data, it shows that South Africa is an outlier, with low informality and high unemployment relative to its income level. If South Africa had informality rates consistent with its income level, unemployment would be much lower at around 7% instead of over 25%. The paper explores regulatory barriers, spatial constraints, lack of infrastructure, and crime as key factors inhibiting the growth of the informal sector. To boost informal activity and employment, it recommends a firm-size based policy matrix addressing these constraints, with a focus on regulatory changes to expand market access, zero-rating of licensing fees, provision of critical infrastructure like storage facilities, and transport vouchers and subsidies to connect informal businesses to markets. Implementing such supply-side policy changes could demonstrate the employment potential of the informal sector and build momentum for broader deregulation. |
| Keywords: | South Africa, unemployment, spatial inequality |
| Date: | 2024–04 |
| URL: | https://d.repec.org/n?u=RePEc:glh:wpfacu:228 |
| By: | Claudio M. Gaiarsa |
| Abstract: | O texto aborda a situação crítica da informalidade na propriedade imobiliária no Brasil e faz uma avaliação da política de regularização fundiária brasileira. A informalidade traz prejuízos tanto para os indivíduos, quanto para a economia do país. Ela também traz prejuízos para a questão da habitação, reduz o valor dos imóveis e dificulta o acesso ao crédito, todos esses efeitos afetando em especial a população de menor renda. A economia do país também sofre com a exclusão de grande parte dos imóveis do mercado formal, impactando negativamente a renda, a geração de empregos e a arrecadação de tributos. O trabalho se propõe avaliar a política nacional de regularização fundiária, que teve início com a lei no 11.977/2009 e foi atualizada pela lei no 13.465/2017. Essa análise busca fornecer contribuições para a reforma da política atual, avaliando-a de acordo com as abordagens teóricas disponíveis na literatura.As evidências indicam que mais da metade dos imóveis residenciais no Brasil estão na informalidade, com estimativas de 45 milhões de domicílios sem título de propriedade regular. Além disso, existe uma grande carência de dados estatísticos sobre imóveis em geral, e mais especificamente sobre a informalidade da titulação de propriedades no país, com raras exceções, duas delas apresentadas no texto. O texto também discute a ausência de estatísticas detalhadas sobre os resultados da política de regularização fundiária, em especial a falta de informações sobre o número de moradias regularizadas e os custos e benefícios associados. A análise é feita com base nos dados disponíveis pelo ONR, que indica um baixo percentual de emissão de matrículas imobiliárias.Por fim o texto avalia os impactos limitados das políticas atuais, bem como problemas na concepção da política, quando privilegia a questão da posse e não da titulação plena, e ao se concentrar em núcleos urbanos informais, deixando de fora a maior parte dos imóveis informais do país, que são os situados nas áreas urbanas regularmente constituídas. |
| Keywords: | Crédito Imobiliário; estatísticas habitacionais; habitação informal; Housing Policy; housing statistics; Informal Housing; Land regularization; Política Habitacional; Real Estate Credit; Regularização fundiária |
| JEL: | R3 |
| Date: | 2024–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:lre:wpaper:lares-2024-4dq4 |