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Informality and Taxation: Evidence from Seven Latin American Countries

Author

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  • Manuchehr Irandoust

    (Independent Researcher, Mellbystrand, Sweden)

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.

Suggested Citation

  • Manuchehr Irandoust, 2024. "Informality and Taxation: Evidence from Seven Latin American Countries," Hacienda Pública Española / Review of Public Economics, IEF, vol. 248(1), pages 91-114, March.
    • Handle: RePEc:hpe:journl:y:2024:v:248:i:1:p:91-114
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    References listed on IDEAS

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    More about this item

    Keywords

    Informality; Tax revenues; Inflation; Latin America; Causality.;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • N35 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Asia including Middle East

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