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Informal Taxation

Benjamin Olken and Monica Singhal ()

Working Paper Series from Harvard University, John F. Kennedy School of Government

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.

JEL-codes: H27 H41 O17 (search for similar items in EconPapers)
Date: 2009-10
New Economics Papers: this item is included in nep-dev, nep-pbe and nep-pub
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Related works:
Journal Article: Informal Taxation (2011) Downloads
Working Paper: Informal Taxation (2011) Downloads
Working Paper: Informal Taxation (2009) Downloads
Working Paper: Informal Taxation (2009) Downloads
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