Informality and Taxation: Evidence from Seven Latin American Countries

Manuchehr Irandoust ()
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Manuchehr Irandoust: Independent Researcher, Mellbystrand, Sweden

Hacienda Pública Española / Review of Public Economics, 2024, vol. 248, issue 1, 91-114

Abstract: This study examines the impact of the shadow economy on taxation in seven Latin American countries between 1993 and 2018. The technique is built using a MIMIC model and a bootstrap panel Granger causality approach. The results show that the variables are related causally, with the shadow economy having a detrimental impact on tax revenues. Governments are advised to embark on labor market and institutional reforms, reduce barriers to firm entry, provide a reliable and sufficient regulatory environment, and provide employee social protection as ways to reduce the informal economy.

Keywords: Informality; Tax revenues; Inflation; Latin America; Causality. (search for similar items in EconPapers)
JEL-codes: J21 J62 N35 (search for similar items in EconPapers)
Date: 2024
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