Informal Taxation

51 Pages Posted: 18 Aug 2009 Last revised: 5 Aug 2010

See all articles by Benjamin A. Olken

Benjamin A. Olken

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); Harvard University - Society of Fellows

Monica Singhal

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: August 2009

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.

Suggested Citation

Olken, Benjamin A. and Singhal, Monica, Informal Taxation (August 2009). NBER Working Paper No. w15221, Available at SSRN: https://ssrn.com/abstract=1454937

Benjamin A. Olken (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-391
Cambridge, MA 02142
United States
617-253-6833 (Phone)
617-253-1330 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-588-1407 (Phone)

Harvard University - Society of Fellows

Cambridge, MA 02138
United States

Monica Singhal

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-496-5062 (Phone)
617-496-6372 (Fax)

HOME PAGE: http://ksgfaculty.harvard.edu/monica_singhal

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
33
Abstract Views
431
PlumX Metrics