A matching model of endogenous growth and underground firms

Lisi, Gaetano; Pugno, Maurizio

doi:10.1111/ijet.12070

Cited by 4 publications

(4 citation statements)

References 55 publications

(90 reference statements)

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“…A series of other tax evasion abatement measures can also be envisaged (Luttmer and Singhal 2014;Mascagni 2018). Lisi and Pugno (2015) conclude in a model study that closer monitoring of tax evasion attempts and lower taxation reduces the underground economy. However, our examination of tax evasion control probabilities in Italy was not conclusive.…”

Section: Underground Economy (Uge) Resultsmentioning

confidence: 99%

“…This conclusion is in line with results from Acocella et al (2020), who advise that tax compliance should be strengthened. Generic advice to increase tax compliance is also given by Moro-Egido and Solano-García (2020), Lisi and Pugno (2015), and Alstadsaeter et al (2022), although Italy is not explicitly included in their studies on tax compliance.…”

Section: Policy Implicationsmentioning

confidence: 99%

See 1 more Smart Citation

Do Increased Tax Base and Reductions in the Underground Economy Compensate for Lost Tax Revenue Following a Tax Reduction Policy? Evidence from Italy 1982 to 2006

Orsi

Seip

2023

Economies

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We here examine the frequent claim that an increase in the tax base and a decrease in tax evasion will compensate for a loss in tax revenues caused by a lower tax level. Using a unique data set for the estimated underground economy in Italy from 1982 to 2006, we found that a loss in tax revenues equivalent to 1% of the GDP would be partly compensated by an increase in GDP of 0.55%. The compensation would come from 0.31% of the GDP increase and from 0.24% of the reductions in the underground economy. These results apply to an economy with a high tax level (>32%) and a high underground economy (≥25%). Applying a high-resolution lead–lag method to the data, we ensured that tax changes were leading the GDP and, thus, a potential cause for changes in the GDP.

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Section: Underground Economy (Uge) Resultsmentioning

confidence: 99%

Section: Policy Implicationsmentioning

confidence: 99%

Do Increased Tax Base and Reductions in the Underground Economy Compensate for Lost Tax Revenue Following a Tax Reduction Policy? Evidence from Italy 1982 to 2006

Orsi

Seip

2023

Economies

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“…The unemployment index, which is supposed to be a lagging index, showed an overall leading index signature in our study, i.e., 73% of the time. However, the German unemployment index has a different relation to the output from in many other countries (Lisi and Pugno 2015;Tang and Bethencourt 2017). Furthermore, the β-coefficient (the slope) in Okun's law is much smaller than in the US (Ball et al 2015).…”

Section: Comparing Ifo and Zew To The Behavioral-based Index Ofmentioning

confidence: 94%

Comparing Sentiment- and Behavioral-Based Leading Indexes for Industrial Production: When Does Each Fail?

2019

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We apply a relatively novel leading-lagging (LL) method to four leading and one lagging indexes for industrial production (IP) in Germany. We obtain three sets of results. First, we show that the sentiment-based ifo index performs best in predicting the general changes in IP (−0.596, range −1.0 to 1.0, −1.0 being best). The ZEW index is very close (−0.583). In third place comes, somewhat unexpectedly, the behavioral-based unemployment index (−0.564), and last comes order flow, OF (−0.186). Second, we applied the LL method to predefined recession and recovery time windows. The recessions were best predicted (−0.70), the recoveries worst (−0.32), and the overall prediction was intermediate (−0.48). Third, the method identifies time windows automatically, even for short time windows, where the leading indexes fail. All indexes scored low during time windows around 1997 and 2005. Both periods correspond to anomalous periods in the German economy. The 1997 period coincides with "the great moderation" in the US at the end of a minor depression in Germany. Around 2005, oil prices increased from $10 to $60 a barrel. There were few orders, and monetary supply was low. Our policy implications suggest that the ZEW index performs best (including recessions and recoveries), but unemployment and monetary supply should probably be given more weight in sentiment forecasting.Economies 2019, 7, 104 2 of 18 increases or decreases in forecasting skill. The present study addresses the first of these modes. The LL method is not itself a forecasting method.We examine three leading indexes and one coinciding/lagging index to Industrial production (IP) with respect to their LL relations. Sentiment-based indexes are frequently used as a forecasting device for the economy in the popular press that deals with economic issues, e.g., CNNmoney (2018) and FinancialTimes (2018). The ifo business climate index is a survey-based sentiment index for Germany from the ifo institute for economic research (IFO 2016). The ZEW business cycle index is from the ZEW (Centre for European Economic Research) (ZEW 2016). The third index is a series for "order flow" (OF) that we interpreted as a behavioral-based index. The fourth index is the standard unemployment index (UE), which is a coinciding/lagging index to IP (Enders 2010;Heij et al. 2011;Balcilar et al. 2013). The LL method can be applied to any pairs comprised of candidate leading time series and target time series, e.g., to update composite leading indicators (Abberger et al. 2018).In the present application, we calculate rolling average LL strength over three observations, and then over a longer time window (9 to 13 observations) to obtain a significance measure. By doing this, we can identify time windows where LL strength becomes weaker or stronger, or changes sign. This is a novel feature of the LL method compared to earlier applications.

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“…Other authors, such as Lisi and Pugno (), analyze the informal sector under the assumption of direct search. This assumption has an important advantage, since the model under this condition is efficient; see Moen ().…”

mentioning

confidence: 99%

Job search inefficiency and optimal policies in the presence of an informal sector

Flórez

2018

Int J of Economic Theory

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In this paper I use a search and matching model to analyze efficiency in an economy with an informal sector, defined as unregulated self‐employment that cannot be observed by the government. Initially I show that the market solution for this kind of economy is inefficient. Subsequently I introduce various government policies that could correct this inefficiency. These policies include social security payments, severance payments, formal taxes, and job creation subsidies. According to this analysis the most effective policy, which restores efficiency while at the same time reducing informality levels in the labor market, is a tax credit. In this model a tax credit provides incentives for informal workers to participate in the formal sector by reducing the tax burden they have to pay as formal employees. As a consequence these workers have a higher probability of finding a higher‐productivity job in the formal sector, which in turn increases the overall efficiency of the economy. This finding is interesting in so far as it provides a theoretical rationale for anti‐informality policies that reduce informality through more rather than less social protection. The paper is therefore a modest contribution toward a policy paradigm in which reducing levels of informality and poverty and providing social protection for workers are seen as complementary rather than contradictory goals.

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A matching model of endogenous growth and underground firms

Cited by 4 publications

References 55 publications

Do Increased Tax Base and Reductions in the Underground Economy Compensate for Lost Tax Revenue Following a Tax Reduction Policy? Evidence from Italy 1982 to 2006

Do Increased Tax Base and Reductions in the Underground Economy Compensate for Lost Tax Revenue Following a Tax Reduction Policy? Evidence from Italy 1982 to 2006

Comparing Sentiment- and Behavioral-Based Leading Indexes for Industrial Production: When Does Each Fail?

Job search inefficiency and optimal policies in the presence of an informal sector

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