American Economic Journal:
Applied Economics
ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)
Informal Taxation
American Economic Journal: Applied Economics
(pp. 1–28)
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 discuss various explanations for and implications of these observed stylized facts. (JEL H24, H27, O12, O17, O23)Citation
Olken, Benjamin A., and Monica Singhal. 2011. "Informal Taxation." American Economic Journal: Applied Economics 3 (4): 1–28. DOI: 10.1257/app.3.4.1Additional Materials
JEL Classification
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H27 Taxation, Subsidies, and Revenues: Other Sources of Revenue
- O12 Microeconomic Analyses of Economic Development
- O17 Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- O23 Fiscal and Monetary Policy in Development