Tax-Transfers Schemes, Informality, and Search Frictions in a Small Open Economy

Tax-Transfers Schemes, Informality, and Search Frictions in a Small Open Economy

This paper evaluates the impact of market-oriented structural reforms, in particular labor market policies, social assistance programs, and trade liberalization on long run unemployment, wage inequality, and the distribution of employment across se...

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Main Author: Robayo-Abril, Monica
Format: Working Paper
Language:English
Published: Washington, DC: World Bank 2018
Subjects:
UNEMPLOYMENT
INFORMALITY
PAYROLL TAX
SUBSIDIES
WAGE GAP
INEQUALITY
LABOR MARKET
LABOR TAX
SOCIAL SECURITY
Online Access:http://documents.worldbank.org/curated/en/169221536150970354/Tax-Transfers-Schemes-Informality-and-Search-Frictions-in-a-Small-Open-Economy
http://hdl.handle.net/10986/30419
id okr-10986-30419
recordtype oai_dc
spelling okr-10986-304192021-06-08T14:42:47Z Tax-Transfers Schemes, Informality, and Search Frictions in a Small Open Economy Robayo-Abril, Monica UNEMPLOYMENT INFORMALITY PAYROLL TAX SUBSIDIES WAGE GAP INEQUALITY LABOR MARKET LABOR TAX SOCIAL SECURITY This paper evaluates the impact of market-oriented structural reforms, in particular labor market policies, social assistance programs, and trade liberalization on long run unemployment, wage inequality, and the distribution of employment across sectors in a small open economy with search frictions and idiosyncratic productivity shocks. The paper builds a search and matching model of a labor market with a large informal sector and estimates the model using Colombian household-level data. Changes in labor taxes may have sizable aggregate, compositional, and distributional effects if workers associate high payroll taxes with more valuable and efficient social security services. The higher is the valuation of the services, the higher is the reduction in the log-wage gap. An expansion of public health insurance to informal sector workers has minor aggregate and distributional effects. Changes in relative prices that negatively affect the relative profitability of the formal sector have quite sizable aggregate effects, producing more long-run unemployment and informality, and increasing unemployment duration. 2018-09-13T20:59:55Z 2018-09-13T20:59:55Z 2018-09 Working Paper http://documents.worldbank.org/curated/en/169221536150970354/Tax-Transfers-Schemes-Informality-and-Search-Frictions-in-a-Small-Open-Economy http://hdl.handle.net/10986/30419 English Policy Research Working Paper;No. 8574 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank Washington, DC: World Bank Publications & Research Publications & Research :: Policy Research Working Paper Latin America & Caribbean Colombia
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic UNEMPLOYMENT
INFORMALITY
PAYROLL TAX
SUBSIDIES
WAGE GAP
INEQUALITY
LABOR MARKET
LABOR TAX
SOCIAL SECURITY
spellingShingle UNEMPLOYMENT
INFORMALITY
PAYROLL TAX
SUBSIDIES
WAGE GAP
INEQUALITY
LABOR MARKET
LABOR TAX
SOCIAL SECURITY
Robayo-Abril, Monica
Tax-Transfers Schemes, Informality, and Search Frictions in a Small Open Economy
geographic_facet Latin America & Caribbean
Colombia
relation Policy Research Working Paper;No. 8574
description This paper evaluates the impact of market-oriented structural reforms, in particular labor market policies, social assistance programs, and trade liberalization on long run unemployment, wage inequality, and the distribution of employment across sectors in a small open economy with search frictions and idiosyncratic productivity shocks. The paper builds a search and matching model of a labor market with a large informal sector and estimates the model using Colombian household-level data. Changes in labor taxes may have sizable aggregate, compositional, and distributional effects if workers associate high payroll taxes with more valuable and efficient social security services. The higher is the valuation of the services, the higher is the reduction in the log-wage gap. An expansion of public health insurance to informal sector workers has minor aggregate and distributional effects. Changes in relative prices that negatively affect the relative profitability of the formal sector have quite sizable aggregate effects, producing more long-run unemployment and informality, and increasing unemployment duration.
format Working Paper
author Robayo-Abril, Monica
author_facet Robayo-Abril, Monica
author_sort Robayo-Abril, Monica
title Tax-Transfers Schemes, Informality, and Search Frictions in a Small Open Economy
title_short Tax-Transfers Schemes, Informality, and Search Frictions in a Small Open Economy
title_full Tax-Transfers Schemes, Informality, and Search Frictions in a Small Open Economy
title_fullStr Tax-Transfers Schemes, Informality, and Search Frictions in a Small Open Economy
title_full_unstemmed Tax-Transfers Schemes, Informality, and Search Frictions in a Small Open Economy
title_sort tax-transfers schemes, informality, and search frictions in a small open economy
publisher Washington, DC: World Bank
publishDate 2018
url http://documents.worldbank.org/curated/en/169221536150970354/Tax-Transfers-Schemes-Informality-and-Search-Frictions-in-a-Small-Open-Economy
http://hdl.handle.net/10986/30419
_version_ 1764471956029046784

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