IDEAS home Printed from https://ideas.repec.org/p/tul/wpaper/1517.html
   My bibliography  Save this paper

Using Public Information to Estimate Self-Employment Earnings of Informal Suppliers

Author

Listed:
  • James Alm

    (Department of Economics, Tulane University)

  • Brian Erard

    (B. Erard & Associates)

Abstract

An enduring problem in the analysis of tax evasion is the difficulty of its measurement. An especially troublesome component of tax evasion arises from informal suppliers, such as self- employed domestic workers, street-side vendors, and moonlighting tradesmen. We develop in this paper a new approach for estimating self-employment earnings of informal suppliers. Our methodology involves using national survey results on self-employment earnings within a carefully selected set of industry categories where informal activities are believed to be concentrated. Then, by comparing these national survey results on self-employment earnings to Internal Revenue Service statistics on the amounts actually reported for tax purposes, it is possible to estimate the extent of noncompliance within the selected industry categories. Our methodology relies on survey respondents being reasonably forthcoming about their earnings, which we are able to confirm through some validation exercises.

Suggested Citation

  • James Alm & Brian Erard, 2015. "Using Public Information to Estimate Self-Employment Earnings of Informal Suppliers," Working Papers 1517, Tulane University, Department of Economics.
    • Handle: RePEc:tul:wpaper:1517
    as

    Download full text from publisher

    File URL: http://repec.tulane.edu/RePEc/pdf/tul1517.pdf
    File Function: First Version, July 2015
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kaushal Joshi & Glenita Amoranto & Rana Hasan, 2011. "Informal Sector Enterprises: Some Measurement Issues," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57, pages 143-165, May.
    2. Naomi E. Feldman & Joel Slemrod, 2007. "Estimating tax noncompliance with evidence from unaudited tax returns," Economic Journal, Royal Economic Society, vol. 117(518), pages 327-352, March.
    3. Erik Hurst & Geng Li & Benjamin Pugsley, 2014. "Are Household Surveys Like Tax Forms? Evidence from Income Underreporting of the Self-Employed," The Review of Economics and Statistics, MIT Press, vol. 96(1), pages 19-33, March.
    4. Derek Blades, 2011. "Estimating Value Added Of Illegal Production In The Western Balkans," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57(1), pages 183-195, March.
    5. James Alm, 2012. "Measuring, explaining, and controlling tax evasion: lessons from theory, experiments, and field studies," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(1), pages 54-77, February.
    6. Per Engstrom & Bertil Holmlund, 2009. "Tax evasion and self-employment in a high-tax country: evidence from Sweden," Applied Economics, Taylor & Francis Journals, vol. 41(19), pages 2419-2430.
    7. Pissarides, Christopher A. & Weber, Guglielmo, 1989. "An expenditure-based estimate of Britain's black economy," Journal of Public Economics, Elsevier, vol. 39(1), pages 17-32, June.
    8. Joel Slemrod & Caroline Weber, 2012. "Evidence of the invisible: toward a credibility revolution in the empirical analysis of tax evasion and the informal economy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(1), pages 25-53, February.
    9. A. C. Kulshreshtha, 2011. "Measuring The Unorganized Sector In India," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57, pages 123-134, May.
    10. Feinstein, Jonathan S, 1990. "Detection Controlled Estimation," Journal of Law and Economics, University of Chicago Press, vol. 33(1), pages 233-276, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marysol McGee & Barbara J. Robles, 2016. "Exploring Online and Offline Informal Work : Findings from the Enterprising and Informal Work Activities (EIWA) Survey," Finance and Economics Discussion Series 2016-089, Board of Governors of the Federal Reserve System (U.S.).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Odd E Nygård & Joel Slemrod & Thor O Thoresen, 2019. "Distributional Implications of Joint Tax Evasion," The Economic Journal, Royal Economic Society, vol. 129(620), pages 1894-1923.
    2. Erlend E. Bø & Joel Slemrod & Thor O. Thoresen, 2015. "Taxes on the Internet: Deterrence Effects of Public Disclosure," American Economic Journal: Economic Policy, American Economic Association, vol. 7(1), pages 36-62, February.
    3. Ana Cinta G. Cabral & Norman Gemmell & Nazila Alinaghi, 2021. "Are survey-based self-employment income underreporting estimates biased? New evidence from matched register and survey data," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(2), pages 284-322, April.
    4. Cabral, Ana Cinta G. & Gemmell, Norman, 2018. "Estimating Self-Employment Income-Gaps from Register and Survey Data: Evidence for New Zealand," Working Paper Series 7625, Victoria University of Wellington, Chair in Public Finance.
    5. Paulus, Alari, 2015. "Tax evasion and measurement error: An econometric analysis of survey data linked with tax records," ISER Working Paper Series 2015-10, Institute for Social and Economic Research.
    6. Andrea Albarea & Michele Bernasconi & Anna Marenzi & Dino Rizzi, 2020. "Income Underreporting and Tax Evasion in Italy: Estimates and Distributional Effects," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(4), pages 904-930, December.
    7. Tomáš Lichard & Jan Hanousek & Randall K. Filer, 2021. "Hidden in plain sight: using household data to measure the shadow economy," Empirical Economics, Springer, vol. 60(3), pages 1449-1476, March.
    8. Cabral, Ana Cinta G. & Gemmell, Norman, 2018. "Estimating Self-Employment Income-Gaps from Register and Survey Data: Evidence for New Zealand," Working Paper Series 20833, Victoria University of Wellington, Chair in Public Finance.
    9. Nikolaos Artavanis & Adair Morse & Margarita Tsoutsoura, 2015. "Tax Evasion across Industries: Soft Credit Evidence from Greece," NBER Working Papers 21552, National Bureau of Economic Research, Inc.
    10. Figari, Francesco & Bazzoli, Martina & Di Caro, Paolo & V. Fiorio, Carlo & Manzo, Marco, 2020. "Size, heterogeneity and distributional effects of self-employment income tax evasion in Italy," EUROMOD Working Papers EM18/20, EUROMOD at the Institute for Social and Economic Research.
    11. Martina Bazzoli & Paolo Di Caro & Franceso Figari & Carlo V. Fiorio & Marco Manzo, 2020. "Size, heterogeneity and distributional effects of self-employment income tax evasion in Italy," Working Papers wp2020-8, Ministry of Economy and Finance, Department of Finance.
    12. Bjørkheim, Julie Brun & Nygård, Odd E., 2024. "Gender Differences in Tax Evasion: Evidence from Norwegian Administrative Data," Discussion Papers 2024/8, Norwegian School of Economics, Department of Business and Management Science.
    13. Israel Marques II, 2022. "Skipping Out On The Check: Institutional Quality, Tax Evasion, And Individual Preferences For Social Policy," HSE Working papers WP BRP 85/PS/2022, National Research University Higher School of Economics.
    14. Tomas Lichard & Jan Hanousek & Randall K. Filer, 2012. "Measuring the Shadow Economy: Endogenous Switching Regression with Unobserved Separation," Economics Working Paper Archive at Hunter College 438, Hunter College Department of Economics.
    15. James Alm, 2019. "What Motivates Tax Compliance?," Journal of Economic Surveys, Wiley Blackwell, vol. 33(2), pages 353-388, April.
    16. Mehmet Burak Turgut & Tomasz Tratkiewicz, 2023. "Estimate of the Underground Economy in Poland Based on Household Expenditures and Incomes," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 15(1), pages 1-29, March.
    17. Engström, Per & Hagen, Johannes, 2017. "Income underreporting among the self-employed: A permanent income approach," European Economic Review, Elsevier, vol. 92(C), pages 92-109.
    18. Thorben C. Kundt & Florian Misch & Birger Nerré, 2017. "Re-assessing the merits of measuring tax evasion through business surveys: an application of the crosswise model," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(1), pages 112-133, February.
    19. Hai Anh La & Duc Anh Dang, 2018. "Income under-reporting and tax evasion: How they impact inequality in Vietnam," WIDER Working Paper Series 148, World Institute for Development Economic Research (UNU-WIDER).
    20. Debora Di Gioacchino & Domenico Fichera, 2022. "Tax evasion and social reputation: The role of influencers in a social network," Metroeconomica, Wiley Blackwell, vol. 73(4), pages 1048-1069, November.

    More about this item

    Keywords

    tax evasion; informal suppliers;

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tul:wpaper:1517. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kerui Geng (email available below). General contact details of provider: https://edirc.repec.org/data/detulus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.