Measuring Income Tax Evasion Using Bank Credit: Evidence from Greece
Nikolaos Artavanis, Adair Morse, Margarita Tsoutsoura
Quarterly Journal of Economics,
Nr. 2,
2016
Abstract
We document that in semiformal economies, banks lend to tax-evading individuals based on the bank’s assessment of the individual’s true income. This observation leads to a novel approach to estimate tax evasion. We use microdata on household credit from a Greek bank and replicate the bank underwriting model to infer the banks estimate of individuals’ true income. We estimate that 43–45% of self-employed income goes unreported and thus untaxed. For 2009, this implies €28.2 billion of unreported income, implying forgone tax revenues of over €11 billion or 30% of the deficit. Our method innovation allows for estimating the industry distribution of tax evasion in settings where uncovering the incidence of hidden cash transactions is difficult using other methods. Primary tax-evading industries are professional services—medicine, law, engineering, education, and media. We conclude with evidence that contemplates the importance of institutions, paper trail, and political willpower for the persistence of tax evasion.
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Exploring the Economic Convergence in the EU New Member States by Using Nonparametric Models
Monica Raileanu Szeles
IWH Discussion Papers,
Nr. 2,
2011
Abstract
This paper analyzes the process of real economic convergence in the New Member States (NMS) bein g formerly centrally planned economies, using nonparametric methods instead of conventional parametric measurement tools like beta and sigma models. This methodological framework allows the examining of the relative income distribution in different periods of time, the number of modes of the density distribution, the existence of “convergence clubs” in the distribution and the hypothesis of convergence at a single point in time. The modality tests (e.g. the ASH-WARPing procedure) and stochastic kernel are nonparametric techniques used in the empirical part of the study to examine the income distribution in the NMS area. Additionally, random effects panel regressions are used, but only for comparison reasons. The main findings of the paper are the bimodality of the income density distribution over time and across countries, and the presence of convergence clubs in the income distribution from 1995 to 2008. The findings suggest a lack of absolute convergence in the long term (1995-2008) and also when looking only from 2003 onwards. The paper concludes that, in comparison with the parametrical approach, the nonparametric one gives a deeper, real and richer perspective on the process of real convergence in the NMS area.
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Worker Remittances and Capital Flows to Developing Countries
Claudia M. Buch, A. Kuckulenz
International Migration,
Nr. 5,
2010
Abstract
Worker remittances constitute an increasingly important channel for the
transfer of resources to developing countries. Behind foreign direct investment,
remittances are the second-largest source of external funding for developing countries. Yet, literature on worker remittances has traditionally focused on the impact of remittances on income distribution within countries, on the determinants of remittances at a micro-level, or on the effects of migration and remittances for specific countries or regions. Macroeconomic determinants and effects of remittances have received more attention only recently. Hence, the focus of this paper is on the macroeconomic determinants of remittances and on differences in these determinants between remittances and other capital flows. We find that
remittances respond more to demographic variables while private capital
flows respond more to macroeconomic conditions.
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Neo-liberalism, the Changing German Labor Market, and Income Distribution: An Institutionalist and Post Keynesian Analysis
John B. Hall, Udo Ludwig
Journal of Economic Issues,
2010
Abstract
This inquiry relies on an Institutionalist and Post Keynesian analysis to explore Germany's neo-liberal project, noting cumulative effects emerging as measurable economic and societal outcomes. Investments in technologies generate rising output-to-capital ratios. Increasing exports offset the Domar problem, but give rise to capital surpluses. National income redistributes in favor of capital. Novel labor market institutions emerge. Following Minsky, good times lead to bad: as seeming successes of neo-liberal policies are accompanied by financial instability, growing disparities in household incomes, and sharp declines in German exports on world markets, resulting in one of the deepest, recent contractions in the industrialized world.
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Gauging the Potential for Social Unrest
Walter Hyll, Oded Stark, Doris A. Behrens
Public Choice,
2010
Abstract
It stands to reason that social unrest does not erupt out of the blue. Although there are a great many reasons why social dismay might descend into social disorder, only few yardsticks or indices can plausibly be used to gauge the potential for social unrest (PSU). If policy makers want to undertake public action to prevent social dismay escalating into social disruption, they obviously need to draw on practical sensors. This paper assesses critically the adequacy of two such measures, the polarization (P) index, and the total relative deprivation (TRD) index. The paper proposes a tentative guide to selecting between these two measures. A review of three stylized scenarios suggests that, where income redistributions reduce the number of distinct income groups, and when each group is characterized by a strong sense of within-group identity, the P index surpasses the TRD index as a basis for predicting PSU. When the within-group identification is weak, however, it is better to use the TRD index to predict PSU.
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Trade's Impact on the Labor Share: Evidence from German and Italian Regions
Claudia M. Buch
IAW Discussion Paper No. 46,
2008
Abstract
Has the labor share declined? And what is the impact of international trade? These
questions are not only relevant in an international context they also matter for
understanding the regional distribution of incomes in a given country. In this
paper, we study two regions with trade exposures that differ from the rest of the
country, and which display distinct changes in the labor share. East German and
Southern Italian regions have a degree of international openness which is below
the countries’ averages. At the same time, there has been a more pronounced
decline in the labor share in East Germany than in West Germany. In Southern
Italy, the labor share has increased in recent years. We show that increased trade
openness is not the main culprit behind changing labor shares.
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The Great Risk Shift? Income Volatility in an International Perspective
Claudia M. Buch
CESifo Working Paper No. 2465,
2008
Abstract
Weakening bargaining power of unions and the increasing integration of the world economy may affect the volatility of capital and labor incomes. This paper documents and explains changes in income volatility. Using a theoretical framework which builds distribution risk into a real business cycle model, hypotheses on the determinants of the relative volatility of capital and labor are derived. The model is tested using industry-level data. The data cover 11 industrialized countries, 22 manufacturing and services industries, and a maximum of 35 years. The paper has four main findings. First, the unconditional volatility of labor and capital incomes has declined, reflecting the decline in macroeconomic volatility. Second, the idiosyncratic component of income volatility has hardly changed over time. Third, crosssectional heterogeneity in the evolution of relative income volatilities is substantial. If anything, the labor incomes of high- and low-skilled workers have become more volatile in relative terms. Fourth, income volatility is related to variables measuring the bargaining power of workers. Trade openness has no significant impact.
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Vertical Intra-industry Trade between EU and Accession Countries
Hubert Gabrisch
IWH Discussion Papers,
Nr. 12,
2006
Abstract
The paper analyses vertical intra-industry trade between EU and Accession countries, and concentrates on two country-specific determinants: Differences in personal income distribution and in technology. Both determinants have a strong link to national policies and to cross-border investment flows. In contrast to most other studies, income distribution is not seen as time-invariant variable, but as changing over time. What is new is also that differences in technology are tested in comparison with cost advantages from capital/labour ratios. The study applies panel estimation techniques with GLS. Results show country-pair fixed effects to be of high relevance for explaining vertical intraindustry trade. In addition, bilateral differences in personal income distribution and their changes are positive related to vertical intra-industry trade in this special regional integration framework; hence, distributional effects of policies matter. Also, technology differences turn out to be positively correlated with vertical intra-industry trade. However, the cost variable (here: relative GDP per capita) shows no clear picture, particularly not in combination with the technology variable.
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Determinants of employment - the macroeconomic view
Christian Dreger, Heinz P. Galler, Ulrich (eds) Walwai
Schriften des IWH,
Nr. 22,
2005
Abstract
The weak performance of the German labour market over the past years has led to a significant unemployment problem. Currently, on average 4.5 mio. people are without a job contract, and a large part of them are long-term unemployed. A longer period of unemployment reduces their employability and aggravates the problem of social exclusion.
The factors driving the evolution of employment have been recently discussed on the workshop Determinanten der Beschäftigung – die makroökonomische Sicht organized jointly by the IAB, Nuremberg, and the IWH, Halle. The present volume contains the papers and proceedings to the policy oriented workshop held in November 2004, 15-16th. The main focus of the contributions is twofold. First, macroeconomic conditions to stimulate output and employment are considered. Second, the impacts of the increasing tax wedge between labour costs and the take home pay are emphasized. In particular, the role of the contributions to the social security system is investigated.
In his introductory address, Ulrich Walwei (IAB) links the unemployment experience to the modest path of economic growth in Germany. In addition, the low employment intensity of GDP growth and the temporary standstill of the convergence process of the East German economy have contributed to the weak labour market performance. In his analysis, Gebhard Flaig (ifo Institute, München) stresses the importance of relative factor price developments. A higher rate of wage growth leads to a decrease of the employment intensity of production, and correspondingly to an increase of the threshold of employment. Christian Dreger (IWH) discusses the relevance of labour market institutions like employment protection legislation and the structure of the wage bargaining process on the labour market outcome. Compared to the current setting, policies should try to introduce more flexibility in labour markets to improve the employment record. The impact of interest rate shocks on production is examined by the paper of Boris Hofmann (Deutsche Bundesbank, Frankfurt). According to the empirical evidence, monetary policy cannot explain the modest economic performance in Germany. György Barabas and Roland Döhrn (RWI Essen) have simulated the effects of a world trade shock on output and employment. The relationships have been fairly stable over the past years, even in light of the increasing globalization. Income and employment effects of the German tax reform in 2000 are discussed by Peter Haan and Viktor Steiner (DIW Berlin). On the base of a microsimulation model, household gains are determined. Also, a positive relationship between wages and labour supply can be established. Michael Feil und Gerd Zika (IAB) have examined the employment effects of a reduction of the contribution rates to the social security system. To obtain robust results, the analysis is done under alternative financing scenarios and with different macroeconometric models. The impacts of allowances of social security contributions on the incentives to work are discussed by Wolfgang Meister and Wolfgang Ochel (ifo München). According to their study, willingness to work is expected to increase especially at the lower end of the income distribution. The implied loss of contributions could be financed by higher taxes.
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