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Informal Taxation

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  • Olken, Benjamin A.
  • Singhal, Monica

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 wide- spread, 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 discuss various explanations for and implications of these observed stylized facts.

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Paper provided by Harvard Kennedy School of Government in its series Scholarly Articles with number 5689166.

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Date of creation: 2011
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Publication status: Published in American Economic Journal: Applied Economics
Handle: RePEc:hrv:hksfac:5689166

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Cited by:
  1. Ivanyna, Maksym & von Haldenwang, Christian, 2012. "A comparative view on the tax performance of developing countries: Regional patterns, non-tax revenue and governance," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 6(32), pages 1-44.
  2. Bandiera, Oriana & Levy, Gilat, 2011. "Diversity and the power of the elites in democratic societies: Evidence from Indonesia," Journal of Public Economics, Elsevier, Elsevier, vol. 95(11), pages 1322-1330.
  3. Gerard Padro i Miquel & Nancy Qian & Yang Yao, 2012. "Social Fragmentation, Public Goods and Elections: Evidence from China," NBER Working Papers 18633, National Bureau of Economic Research, Inc.
  4. Koen P.R. Bartels & Guido Cozzi & Noemi Mantovan, 2011. "Public Spending and Volunteering: "The Big Society", Crowding Out, and Volunteering Capital," Working Papers 2011_09, Durham University Business School.
  5. Bandiera, Oriana & Levy, Gilat, 2010. "Diversity and the Power of the Elites in Democratic Societies: A model and a test," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7985, C.E.P.R. Discussion Papers.

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