C8- [2019 Matos & Veiga] - MIMIC for LATAM - On the shadow economy in LATAM

 




ANALYSIS OF ARTICLE

This article is probably the first to focus on Latin American countries. It provides several contributions:

  1. 1)      It analyses 18 countries over a significant span of time, 1990 to 2013
  2. 2)      Uses electricity per capita as an indicator variable, as done by Schneider
  3. 3)      It shows that higher monetary liquidity drives NOE, while higher investments lower NOE. Proposes money supply (MS) and investment / participation of gross capital formation in GDP (I) as causal variables.

Interesting to observe that Tax Burden, usually a strong causal variable in several other models, does not have significance on the MIMIC models presented.

 

SUMMARY OF ARTICLE (provides an overview of the Article, with copy & paste of contents, aiming to summarize its contents).

 

Using data from the World Bank Development Indicators, the article uses time series from 1990 to 2013 for 18 countries in Latin America.

 

Indicator variables:

  • -          Electricity per capita (first MIMIC analysis for LATAM with such variable) from Arby, Malik and Hanif (2012)
  • -          Labor force participation

 

Causal variables:

  • -          Regulatory burden – weight of the public sector in the economy
  • -          Tax burden
  • -          Unemployment rate
  • -          Participation of gross capital formation – proxy for economic development, where high levels should lead to lower NOE
  • -          Degree of openness
  • -          Country’s money supply























Comments

Post a Comment

Popular posts from this blog

A1 - [Ulyssea 2020] - Informality: Causes and Consequences for Development

Image
  ANALYSIS OF ARTICLE The Article provides a comprehensive analysis of contemporary literature on the subject. Size matters, as informal firms tend to be smaller; once they grow, they get increased pressure to formalize, whereas to get access to credit, whereas the value chain (vendors, Customers) lead the firm to do so. Formality entry costs, ongoing costs (e.g., lower taxes) have limited impact, and enforcement has higher impact. Effects on the firm productivity are not clear. For the worker, the trade-off between labor regulations / social security and informality maybe tackled with education and a redesign of social security. Unemployment insurance serves to define the reserve utility tied to formalization decisions.     SUMMARY OF ARTICLE (provides an overview of the Article, with copy & paste of contents, aiming to summarize its contents). Author provides a definition of margins of informality [Ulyssea 2018]: Extensive margin, based on whether firms register an...
Read more

B2-[Rocha et al 2017] - Do-Lower-Taxes-Reduce-Informality-Evidences-from-Brazil

Image
  ANALYSIS OF ARTICLE Article B2 analyzes the period of 2009-2012 for the introduction of the MEI program in Brazil. Since then, the number of registered firms has grown from ~2.6M MEI firms in 2012 to ~11M firms in 2021. Article B1 shows data from 2009-2015, and present results that show that both (1) reduction of entry cost and (2) reduction of ongoing taxes have impact on MEI growth, while this article B2 with data from 2009-2012 shows that only (2) happens. New data from MEI from 2019 may provide subsidy for further investigation on the application of the policy.     SUMMARY OF ARTICLE   Section 1 (Introduction) – Paper aims to analyze the effects of reducing ongoing formality costs to a firm by estimating the impact of a large-scale program in Brazil called MEI (Individual Micro-Entrepreneur Program – IMP), introduced in 2009. Exogeneity comes from a pre-existing tax framework for micro, small and medium enterprises. Identification hypothesis comes from no indi...
Read more

B1 - [Farias & Rocha 2021] - Formality Costs, Registration and Development of Microentrepreneurs: Evidence from Brazil

Image
  ANALYSIS OF ARTICLE The Article main merit is to provide an empirical study corroborating with the literature that indicates that rate of formality firms increases if registration costs, and taxes reduce. It also indicates that formalization has no effect on their TFP. The Authors analyze the effects of the implementation of the MEI Program in Brazil (MEI = Individual Microentrepreneur) from its establishment in 2009 till 2015. Six million new firms were formalized during such period, and the authors try to demonstrate that the effect is net of other possible movements on formal / informal labor forces. New data from 2021 shows that now 11M MEIs are registered since 2009, and 90% of those firms are active. Phenomena is based on the low registration and tax costs, with microentrepreneurs choosing to formalize their situation as they can be part of the safety net (with some limited benefits), as well as being out of illegality as well as able to take credit lines and formally invoi...
Read more