| Full text | |
| Author(s): |
Narita, Renata
Total Authors: 1
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| Document type: | Journal article |
| Source: | REVIEW OF ECONOMIC DYNAMICS; v. 35, p. 1-34, JAN 2020. |
| Web of Science Citations: | 0 |
| Abstract | |
This paper develops and estimates a life-cycle on-the-job search model with self- employment that captures labor market stylized facts typical of middle-income developing economies. Workers flow across unemployment, self-employment, formal and informal wage employment. Individuals differ across and within employment sectors in terms of earnings, self-employment ability and transition rates. Counterfactual analysis shows that a flat reduction in payroll taxation increases the share of formal sector workers mainly due to a drop in self-employment. A proportional reduction in payroll taxes improves total welfare by increasing formal sector wages and profits, and allowing for a better allocation of high education workers. Converting to a progressive payroll tax system, equivalent to a flat reduction, is ineffective in reducing informality and leads to a decline in total welfare. (C) 2019 Elsevier Inc. All rights reserved. (AU) | |
| FAPESP's process: | 13/23045-0 - Informality, workers' compensation and labor market welfare |
| Grantee: | Renata Del Tedesco Narita |
| Support Opportunities: | Regular Research Grants |