IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Informal Taxation

  • Benjamin A. Olken
  • Monica Singhal

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 discuss various explanations for and implications of these observed stylized facts. (JEL H24, H27, O12, O17, O23)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.aeaweb.org/articles.php?doi=10.1257/app.3.4.1
Download Restriction: no

File URL: http://www.aeaweb.org/aej/app/data/2010-0122_data.zip
Download Restriction: no

File URL: http://www.aeaweb.org/aej/app/app/2010-0122_app.pdf
Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.

Article provided by American Economic Association in its journal American Economic Journal: Applied Economics.

Volume (Year): 3 (2011)
Issue (Month): 4 (October)
Pages: 1-28

as
in new window

Handle: RePEc:aea:aejapp:v:3:y:2011:i:4:p:1-28
Note: DOI: 10.1257/app.3.4.1
Contact details of provider: Web page: https://www.aeaweb.org/aej-applied
Email:


More information through EDIRC

Order Information: Web: https://www.aeaweb.org/subscribe.html

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Falk, Armin & Fehr, Ernst & Fischbacher, Urs, 2005. "Driving Forces Behind Informal Sanctions," IZA Discussion Papers 1635, Institute for the Study of Labor (IZA).
  2. Ran Abramitzky, 2008. "The Limits of Equality: Insights from the Israeli Kibbutz," The Quarterly Journal of Economics, MIT Press, vol. 123(3), pages 1111-1159, August.
  3. Brunner, Eric & Sonstelie, Jon, 2003. "School finance reform and voluntary fiscal federalism," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2157-2185, September.
  4. Jerry A. Hausman & Bronwyn H. Hall & Zvi Griliches, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," NBER Technical Working Papers 0017, National Bureau of Economic Research, Inc.
  5. Alberto Alesina & Reza Baqir & William Easterly, 1999. "Public Goods And Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1243-1284, November.
  6. Miguel, Edward & Gugerty, Mary Kay, 2005. "Ethnic diversity, social sanctions, and public goods in Kenya," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2325-2368, December.
  7. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
  8. Olken, Benjamin A., 2005. "Revealed community equivalence scales," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 545-566, February.
  9. David Masclet & Charles Noussair & Steven Tucker & Marie-Claire Villeval, 2003. "Monetary and Nonmonetary Punishment in the Voluntary Contributions Mechanism," American Economic Review, American Economic Association, vol. 93(1), pages 366-380, March.
  10. Wooldridge, J.M., 1990. "Distribution-Free Estimation Of Some Nonlinear Panel Data Models," Working papers 564, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. Bice, Douglas C. & Hoyt, William H., 2000. "The Impact of Mandates and Tax Limits on Voluntary Contributions to Local Public Services: An Application to Fire-Protection Services," National Tax Journal, National Tax Association, vol. 53(n. 1), pages 79-104, March.
  12. Besley, Timothy & Coate, Stephen, 1995. "Group lending, repayment incentives and social collateral," Journal of Development Economics, Elsevier, vol. 46(1), pages 1-18, February.
  13. Bagnoli, Mark & Lipman, Barton L, 1989. "Provision of Public Goods: Fully Implementing the Core through Private Contributions," Review of Economic Studies, Wiley Blackwell, vol. 56(4), pages 583-601, October.
  14. Simon Gachter & Ernst Fehr, 2000. "Cooperation and Punishment in Public Goods Experiments," American Economic Review, American Economic Association, vol. 90(4), pages 980-994, September.
  15. Burgess, Robin & Stern, Nicholas, 1993. "Taxation and Development," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 762-830, June.
  16. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June.
  17. Roger Gordon & Wei Li, 2005. "Tax Structure in Developing Countries: Many Puzzles and a Possible Explanation," NBER Working Papers 11267, National Bureau of Economic Research, Inc.
  18. Banerjee, Abhijit & Newman, Andrew F, 1998. "Information, the Dual Economy, and Development," Review of Economic Studies, Wiley Blackwell, vol. 65(4), pages 631-53, October.
  19. Townsend, Robert M, 1995. "Financial Systems in Northern Thai Villages," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1011-46, November.
  20. Benjamin, Dwayne, 1992. "Household Composition, Labor Markets, and Labor Demand: Testing for Separation in Agricultural Household Models," Econometrica, Econometric Society, vol. 60(2), pages 287-322, March.
  21. Glazer, Amihai & Konrad, Kai A, 1996. "A Signaling Explanation for Charity," American Economic Review, American Economic Association, vol. 86(4), pages 1019-28, September.
  22. Thomas, Barbara P., 1987. "Development through Harambee: Who wins and who loses? Rural self-help projects in Kenya," World Development, Elsevier, vol. 15(4), pages 463-481, April.
  23. Townsend, R.M., 1991. "Risk and Insurance in Village India," University of Chicago - Economics Research Center 91-3, Chicago - Economics Research Center.
  24. Khwaja, Asim Ijaz, 2009. "Can good projects succeed in bad communities?," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 899-916, August.
  25. Abhijit Banerjee & Esther Duflo, 2006. "Addressing Absence," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 117-132, Winter.
  26. Ghatak, Maitreesh, 1999. "Group lending, local information and peer selection," Journal of Development Economics, Elsevier, vol. 60(1), pages 27-50, October.
  27. Pranab Bardhan, 2002. "Decentralization of Governance and Development," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 185-205, Fall.
  28. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  29. Ran Abramitzky, 2008. "The Limits of Equality: Insights from the Israeli Kibbutz," Discussion Papers 07-048, Stanford Institute for Economic Policy Research.
  30. Besley, Timothy & Coate, Stephen, 1992. "Workfare versus Welfare Incentive Arguments for Work Requirements in Poverty-Alleviation Programs," American Economic Review, American Economic Association, vol. 82(1), pages 249-61, March.
  31. Beard, Victoria A., 2007. "Household Contributions to Community Development in Indonesia," World Development, Elsevier, vol. 35(4), pages 607-625, April.
  32. Wilson, L. S., 1992. "The Harambee movement and efficient public good provision in Kenya," Journal of Public Economics, Elsevier, vol. 48(1), pages 1-19, June.
  33. Ngau, Peter M, 1987. "Tensions in Empowerment: The Experience of the Harambee (Self-Help) Movement in Kenya," Economic Development and Cultural Change, University of Chicago Press, vol. 35(3), pages 523-38, April.
Full references (including those not matched with items on IDEAS)

This item is featured on the following reading lists or Wikipedia pages:

  1. Informal Taxation (AEJ:AE 2011) in ReplicationWiki

When requesting a correction, please mention this item's handle: RePEc:aea:aejapp:v:3:y:2011:i:4:p:1-28. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros)

or (Michael P. Albert)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.