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Informal Taxation

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  • Singhal, Monica
  • Olken, Benjamin A.

Abstract

Informal payments are a frequently overlooked source of local public finance in developing countries. We use microdata from ten countries to establish stylized facts on the magnitude, form, and distributional implications of this "informal taxation." Informal taxation is widespread, particularly in rural areas, with substantial in-kind labor payments. The wealthy pay more, but pay less in percentage terms, and informal taxes are more regressive than formal taxes. Failing to include informal taxation underestimates household tax burdens and revenue decentralization in developing countries. We propose a simple model of information and enforcement constraints that parsimoniously explains the patterns in the data.

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Bibliographic Info

Paper provided by Harvard Kennedy School of Government in its series Scholarly Articles with number 4449108.

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Date of creation: 2009
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Publication status: Published in HKS Faculty Research Working Paper Series
Handle: RePEc:hrv:hksfac:4449108

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Cited by:
  1. Padro, Gerard & Qian, Nancy & Yao, Yang, 2013. "Social Fragmentation, Public Goods and Elections: Evidence from China," CEPR Discussion Papers 9278, C.E.P.R. Discussion Papers.
  2. Bandiera, Oriana & Levy, Gilat, 2010. "Diversity and the Power of the Elites in Democratic Societies: A model and a test," CEPR Discussion Papers 7985, C.E.P.R. Discussion Papers.
  3. Bandiera, Oriana & Levy, Gilat, 2011. "Diversity and the power of the elites in democratic societies: Evidence from Indonesia," Journal of Public Economics, Elsevier, vol. 95(11), pages 1322-1330.
  4. Ivanyna, Maksym & von Haldenwang, Christian, 2012. "A comparative view on the tax performance of developing countries: Regional patterns, non-tax revenue and governance," Economics Discussion Papers 2012-10, Kiel Institute for the World Economy.
  5. Bartels, Koen & Cozzi, Guido & Mantovan, Noemi, 2011. "Public Spending and Volunteering: "The Big Society", Crowding Out, and Volunteering Capital," MPRA Paper 29730, University Library of Munich, Germany.

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