Economics: Research Guide

Notably, Africa countries have enjoyed relatively strong economic growth for the past years (decade) mainly because of impressive global demand for primary commodities. Unfortunately, Africa’s economic growth had failed to generate many good jobs and thus postponing the benefits of the demographic divided of a large working-age population. Consequently, digital (online) gig work is rapidly increasing new form of work that poses tough challenges and tradeoffs for African governments. Essentially, these gig jobs could be a stepping stone to better-quality jobs for young or low-skilled workers by way of assisting them to learn critical digital skills that closes the digital divide. However, g..

Presumptive tax regimes (also known as simplified tax regimes) intend to reduce tax compliance costs for micro and small businesses (and enforcement costs for the tax administration) while levying a lower tax burden as compared to the standard tax system. This working paper compiles detailed information on the presumptive tax regimes existing in a selection of OECD and non-OECD countries, identifies common practices adopted across the countries examined and provides multiple examples of best practices observed in these regimes. These examples can serve as guidance to policy makers and tax administrations to strengthen particular features of the presumptive tax regimes implemented in their ju..

Informal employment is widespread across many developing countries and remains to be the source of livelihood for billions of workers and their families. Even though diverse forms of informal employment can be seen globally, the paper mainly focuses on developing countries due to high share and endurance of the informal sector. The aim of the paper is to provide a comprehensive overview of the drivers and outcomes of informal employment by distinguishing between wage labor and self-employment. Additionally, the paper reviews potential policies that could incentivize workers and informal firms to transition to the formal sector. Given that the impact of informal employment on workers’ well-..

We incorporate tax evasion to a demand-led macrodynamic model of capacity utilization and output growth rate. The frequency of tax evaders is endogenously time-varying, driven by imitation-augmented satisficing evolutionary dynamics involving pecuniary and non-pecuniary factors reflecting the distribution of tax morale across taxpayers. Consequently, the microdiversity of tax compliance behavior and the macrodynamics of economic activity are co-evolutionarily coupled. Matching empirical evidence, long-run heterogeneity in tax compliance is a stable evolutionary equilibrium, and the higher the median tax morale, the lower the frequency of tax evaders. Other comparative statics matching empiri..

This research investigates how entrepreneurs in an early-stage market economy decide their level of compliance with formal rules and finds the manner in which they interact with government officials to operate on a continuum of formality. Focusing on the nonmarket strategy approaches entrepreneurs employ to establish relationships with government officials, we build a model that shows how entrepreneurs adopt strategies aligned with their firm's level of formality, spanning low to high formality practices. We draw on qualitative interview data from entrepreneurs who exhibit varying levels of compliance with state-provided rules and guidelines. We inductively theorize that deciding the firms' ..

This paper provides conceptual definitions and distinctions between formalization, worker protection and productivity enhancement, and examines the impact of social protection and labor market policies in achieving these inter-related yet distinct policy goals. Focusing on empirical evidence from low- and middle-income countries collated from over 200 reviewed studies, reports, and documents, the authors find that workforce formalization is best achieved through macroeconomic and firm-level policies and through the extension of social insurance programs to the informally employed. Other social protection and labor market programs may only contribute marginally and indirectly to formalization..

This paper investigates the impacts and implications of a supply-side intervention of black market transactions using a natural experiment from lottery markets in Thailand. Between June 2003 and November 2006, the Thai government imposed a crackdown on the black-market lottery while introducing a new lottery with similar characteristics as a substitute. Using panel data of Thai households, we find that the intervention was effective in eliminating the black-market lottery. Household spending on the black-market lottery dropped sharply after June 2003 and increased again after November 2006. The substitution from the black-market lottery to the government lottery in 2003 was small, while the ..

This paper reviews recent efforts in social science to analyze labor enforcement in low-and-middle income countries (LMIC) and inform policy debates. Despite the existing limitations, the empirical evidence suggests that: 1) Enforcement is quite low in LMIC; there are fewer inspectors and inspections, lower penalties, and less trust in the judiciary compared to developed countries. 2) Increasing enforcement produces more compliance with little job destruction, although there is substantial debate and heterogeneity across countries. 3) Countries with more protective labor codes tend to enforce less. 4) Countries that become more open to trade also tend to enforce less. However, trade agreemen..

The informal economy in Africa has been considered both the cause and result of underdevelopment, and that dichotomous understanding of the formal-informal divide, simply based on a single criterion such as whether an enterprise is registered or not, is not satisfactory. In this paper, we propose Composite Informality Index (CII) as a continuous measure of informality enclosing multiple indicators of individual enterprise. We applied multiple correspondence analysis to quantify CII. We examined whether CII has explanatory power for firm size, sales and growth, and the degree of resiliency seen in shocks received from COVID-19 and recovery from them. We found that informality is associated wi..

This paper attempts to gain greater clarity about an issue which has considerable bearing on economic policy in Africa yet remains poorly diagnosed: the relation between informality and dynamism among low-income micro enterprises. We begin with the premise that micro entrepreneurs are driven by non-pecuniary motives, to varying degree, and adopt informal ways of doing business when informal motivations are strong. Building on this premise, we construct a regression model in which the dynamism of microenterprises is explained by the informality of entrepreneurs' motivations and of his/her ways of doing business as well as interactions among these two informality variables. We apply the model ..

This paper presents findings of a large-scale survey of low-income microentrepreneurs in Ghana, Kenya and Nigeria, conducted in order to understand the informality of the microenterprise sector. The findings reveal three key outcomes. First, contrary to common belief in the literature on informality, a significant portion of low-income entrepreneurs boast high educational credentials, and their businesses exhibit substantial sales revenues, in each case surpassing national averages. Surprisingly, nearly all low-income microenterprises pay some form of tax and maintain official registration with some government agencies. Second, again contrary to assumptions often made, microenterprises do no..

En este documento se examina la variación del empleo que presenta un riesgo elevado de automatización de 2005 a 2020 en México. Los resultados apuntan a que la expansión de dicho empleo fue relativamente pequeña, en tanto que la composición por nivel de riesgo se mantuvo bastante estable durante ese período. Se destaca la importancia de las unidades económicas en el sector informal, el trabajo doméstico remunerado y la agricultura de autosubsistencia. Estas actividades concentran a alrededor del 35% de las personas trabajadoras y se caracterizan por estar poco integradas en la economía global y por su escasa inversión en tecnología. En un contexto de incertidumbre económica y r..

This technical note introduces analytics for compliance risk management in tax administration. Together with its accompanying toolkit, the note is intended as a starter kit to support capacity development in compliance planning, risk, and intelligence groups. Developed primarily for emerging analysts new to tax administration, the note presents both theory and practical aspects of analytics. Its toolkit is comprised of an initial collection of analytics templates designed to assist in turning the theory presented into practice in the areas of: (1) compliance planning; (2) taxpayer profiling; and (3) audit case selection.

En Colombia ha habido una consolidación de la política de vivienda que ha permitido la reducción del déficit en la zona urbana del país. Sin embargo, cuando se comparan los dos últimos censos de población en los años 2005 y 2018, se encuentra un leve aumento del déficit de vivienda. Existe por lo tanto una paradoja entre una política de vivienda consolidada institucionalmente, y un déficit persistente. Las condiciones habitacionales inadecuadas son persistentes en los contextos urbanos principalmente en las periferias surgidas a partir de dinámicas de autoconstrucción informales. Por otro lado, existe una elevada demanda de vivienda formal derivada de presiones demográficas. De..

Monitoring patterns of segregation and inequality at small area geographic levels is extremely costly. However, the increased availability of data through nontraditional sources such as satellite imagery facilitates this task. This paper assess the relevance of data from nightlight and day-time satellite imagery as well as building footprints and localization of points of interest for mapping variability in socioeconomic outcomes, i.e., household income, labor formality, life quality perception and household informality. The outcomes are computed at a granular level by combining census data, survey data, and small area estimation. The results reveal that non traditional sources are important..

Governments increasingly use changes in tax rules to combat evasion. We develop a general approach to point-identify tax compliance along with supply and demand elasticities; identification requires data on prices and quantities before and after changes in tax enforcement and a demand or supply shifter. We illustrate our approach using data on Airbnb collection agreements, where full enforcement is achieved by shifting the tax burden away from hosts to renters via the platform. We find that taxes are paid on roughly zero to 3.5 percent of Airbnb transactions prior to enforcement.

Ageing societies pose a unique challenge for Thailand, where a large informal sector excludes most workers from mandatory retirement ages and social security coverage. While extending retirement ages is a pertinent consideration for the formal sector, policy considerations should also encompass the informal sector. Specifically, policies should strive to enhance the physical and cognitive abilities of older workers in the informal sector through appropriate guidance, empowering them to prolong their working years and bolster their financial security. Despite the availability of voluntary social security schemes, enrollment rates among informal workers remain low due to a combination of facto..

We examine the effects of international trade in the presence of a set of domestic distortions giving rise to informality, a prevalent phenomenon in developing countries. In our quantitative model, the informal sector arises from burdensome taxes and regulations that are imperfectly enforced by the government. Consequently, smaller, less productive firms face fewer distortions than larger, more productive ones, potentially leading to substantial misallocation. We show that in settings with a large informal sector, the gains from trade are significantly amplified, as reductions in trade barriers imply a reallocation of resources from initially less distorted to more distorted firms. We confir..

We estimate the labor market power of over 13, 000 manufacturing establishments across 82 low and middle-income countries around the world. Within local labor markets, larger and more productive firms have higher wage markdowns and pay lower wages. Labor market power across countries exhibits a mild non-linear relationship with GDP per capita, entirely driven by a strong hump-shaped relationship with the share of self-employed workers. Labor market institutions fully account for the hump shape: in countries with unemployment protection, wage markdowns increase with the share of self-employment while the opposite is true in countries without it. We explain this finding through the lens of a s..

We study behavioral responses to personal wealth taxes in Colombia. We utilize tax microdata from 1993 to 2016 linked with the leaked Panama Papers to investigate offshoring to the country’s key tax havens. We leverage variation from discrete jumps in tax liability and four major reforms to the wealth tax system, including changes in tax rates and duration, using bunching and difference-in-difference techniques. We find compelling evidence that taxpayers instantly reduce the wealth they declare in response to a wealth tax. Moreover, these effects can persist for years even after the wealth tax is no longer in place, providing the first evidence of a hysteresis effect for a temporary tax po..

Governments are always dealing with unexpected shocks, like wars, terrorism, financial crises, natural disasters, and the like. A recent prominent example is the SARS-CoV-2 pandemic. Since early 2020, governments around the world have enacted a range of unprecedented measures in an attempt to protect their citizens, with quite mixed results. This varied record has in turn had dramatic effects on peoples perceptions of their government, especially on their trust in government and so on their willingness to obey the many government mandates generated by the pandemic. This willingness to obey government mandates extends well beyond pandemic policies to all other dimensions of government laws an..

Ensuring compliance with the tax laws is an enduring challenge for all governments, and government strategies are constantly evolving as circumstances change. Recently, countries around the world have experienced some major shocks, shocks that are already affecting tax compliance and the policies that governments utilize to maintain compliance. In this paper I examine the effects of two especially important shocks -- technological shocks and SARS-CoV-2 pandemic shocks -- on tax compliance in the years ahead. I argue first that many of these changes in technology will improve the ability of governments to improve tax compliance, mainly by increasing the flow of information to governments, whi..

We estimate the labor market power of over 13, 000 manufacturing establishments across 82 low and middle-income countries around the world. Within local labor markets, larger and more productive firms have higher wage markdowns and pay lower wages. Labor market power across countries exhibits a mild non-linear relationship with GDP per capita, entirely driven by a strong hump-shaped relationship with the share of self-employed workers. Labor market institutions fully account for the hump shape: in countries with unemployment protection, wage markdowns increase with the share of self-employment while the opposite is true in countries without it. We explain this finding through the lens of a s..

Most tax systems around the world are highly complex. While several economists have studied the potential costs associated with tax complexity, few have explored if complexity can also have beneficial effects. In a novel model where taxpayers can acquire costly knowledge to reduce their tax burden, we show that when elasticities of taxable income are heterogeneous, a complex tax system can act as a sorting device similar to second-degree price discrimination, where more elastic taxpayers will invest in more tax knowledge. We prove that if elasticities are increasing with income, introducing tax complexity can allow the government to raise higher tax revenues at no efficiency cost. However, w..

This article investigates gender differences in wage losses in Brazil resulting from job dismissal and periods of non-formal employment. It examines the wage dynamics of men and women to determine the occurrence and magnitude of these losses, as well as the subsequent recovery process upon returning to formal employment. Using administrative employer-employee data from 2003 to 2018, the study employs a matching strategy and event-study estimation to analyze the transitions from formal employment. Estimations are conducted separately for men and women. The findings reveal that both genders experience immediate and persistent wage losses after leaving formal employment. Women generally experie..

I study the labor market risks associated with being self-employed. I document that the self-employed are subject to larger earnings fluctuations than employees and that they frequently transition into unemployment. Given that the self-employed are not eligible to unemployment insurance, I analyze the provision of benefits targeted at these risks using a calibrated search model with (i) precautionary savings, (ii) work opportunities in paid and self-employment, and (iii) skill heterogeneity. This exercise suggests that extending the current U.S. unemployment insurance scheme to the self-employed comes with a clear increase in the transition rate from self-employment to unemployment and an un..

The COVID-19 pandemic, and the consequent nationwide lockdown in India that began on March 25, 2020, caused a major disruption in the labour market, leading to the widespread loss of livelihoods and food insecurity. The findings from a telephonic survey of a representative sample of more than 3, 000 households in the National Capital Region (NCR) also reveal a dramatic loss in earning capacity. The place of residence and occupation mediated the impact of the lockdown, with greater vulnerabilities witnessed amongst those engaged in informal employment, especially in urban areas. The Government rolled out a series of welfare measures in response to the widespread economic distress, with the pr..

We introduce an informal sector into a real-business-cycle setup augmented with a detailed government sector. We calibrate the model to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2016). We investigate the quantitative importance of the presence of a grey economy for the cyclical fluctuations in Bulgaria. We find that incorporating an informal sector improves the model fit against data, as compared to the standard RBC model, and thus this sector is an important ingredient that needs to be considered by researchers interested in business cycle-, or public finance issues.

The aim of this study is to assess the effect of informal employment on the occurrence of overeducation in developing countries, focusing on the specific case of the DRC. Using employment data, we determine the incidence of overeducation and we isolate the role of informal employment as a determinant of overeducation. To measure overeducation, we mainly use the normative (adequationist) approach. We find an incidence of overeducation in the order of 33.3% in the DRC labor market. The econometric results based on recursive bivariate Probit suggest a positive and significant effect of informal employment. The results found are robust even when using the statistical approach as an alternative m..