Informal Taxation
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Olken_Informal taxation.pdf
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Author(s)
Olken, Benjamin A.
Singhal, Monica
Date Issued
January 2011
Journal
American Economic Journal: Applied Economics
Publisher
American Economic Association
Citation
Olken, Benjamin A. and Monica Singhal. "Informal Taxation." American Economic Journal: Applied Economics. Oct 2011, Vol. 3, No. 4: Pages 1-28.
Version
Author's final manuscript
Abstract
Informal payments are a frequently overlooked source of local public fi nance 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 wide-
spread, 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.
MIT Department
Massachusetts Institute of Technology. Department of Economics
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Attribution-Noncommercial-Share Alike 3.0 Unported
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DOI of Published Version
http://dx.doi.org/10.1257/app.3.4.1
https://doi.org/10.1257/app.3.4.1
