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The effect of taxation on informal employment: evidence from the Russian flat tax reform

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  • Slonimczyk, Fabian

Abstract

The 2001 Russian tax reform reduced average tax rates for the personal income tax and the payroll or social tax. It also made the tax structure more regressive. Because individuals in the lower income bracket were for the most part not affected, it is possible to estimate the effects of the reform using a differences-in-differences approach. I study the effect of the reform on informal employment. Informality is defined using information on employment registration and self-employment. Applying parametric and semi-parametric techniques, I find evidence that the tax reform led to a significant reduction in the fraction of informal employees. Among the different forms of informality I study, the reform seems to have had the strongest effect on the prevalence of informal irregular activities. I also document stronger effects on individuals who benefited from the largest reductions in tax rates.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35404.

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Date of creation: 2011
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Handle: RePEc:pra:mprapa:35404

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Keywords: informal sector; entrepreneurship; tax reform; difference-in-difference; transition; Russia;

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Citations

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Cited by:
  1. Lehmann, Hartmut & Muravyev, Alexander, 2012. "Labor Market Institutions and Informality in Transition and Latin American Countries," IZA Discussion Papers 7035, Institute for the Study of Labor (IZA).
  2. Hartmut Lehmann & Anzelika Zaiceva, 2014. "Informal Employment in Russia: Definitions, Incidence, Determinants and Labor Market Segmentation," Center for Economic Research (RECent), University of Modena and Reggio E., Dept. of Economics 098, University of Modena and Reggio E., Dept. of Economics.
  3. Hazans, Mihails, 2011. "Informal Workers across Europe: Evidence from 30 Countries," IZA Discussion Papers 5871, Institute for the Study of Labor (IZA).
  4. Muravyev, Alexander & Oshchepkov, Aleksey, 2013. "Minimum Wages, Unemployment and Informality: Evidence from Panel Data on Russian Regions," IZA Discussion Papers 7878, Institute for the Study of Labor (IZA).
  5. H. Lehmann & A. Zaiceva, 2013. "Informal Employment in Russia: Incidence, Determinants and Labor Market Segmentation," Working Papers wp903, Dipartimento Scienze Economiche, Universita' di Bologna.
  6. Lehmann, Hartmut & Zaiceva, Anzelika, 2013. "Re-defining Informal Employment and Measuring its Determinants: Evidence from Russia," IZA Discussion Papers 7844, Institute for the Study of Labor (IZA).
  7. Anna Zudina, 2013. "Do informal workers make an underclass? An analysis of subjective social status," HSE Working papers, National Research University Higher School of Economics WP BRP 24/SOC/2013, National Research University Higher School of Economics.
  8. Slonimczyk, Fabian & Gimpelson, Vladimir, 2013. "Informality and Mobility: Evidence from Russian Panel Data," IZA Discussion Papers 7703, Institute for the Study of Labor (IZA).

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