Author(s)Olken, Benjamin A.; Singhal, Monica
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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.
DepartmentMassachusetts Institute of Technology. Department of Economics
American Economic Journal: Applied Economics
American Economic Association
Olken, Benjamin A. and Monica Singhal. "Informal Taxation." American Economic Journal: Applied Economics. Oct 2011, Vol. 3, No. 4: Pages 1-28.
Author's final manuscript