Advanced Search
MyIDEAS: Login to save this paper or follow this series

The elasticity of Informality to Taxes and tranfers

Contents:

Author Info

  • Jorge Alonso-Ortiz

    ()
    (Centro de Investigación Económica (CIE), Instituto Tecnológico Autónomo de México (ITAM))

  • Julio Leal

    ()
    (Banco de México)

Abstract

We study the impact on the size of the informal sector of a tax levied on formal workers, and transfers that may be distributed to both formal and informal workers alike. We build a search model that features an informal sector and we calibrate it to data from Mexico. We investigate whether changes in size and distribution of transfers between formal and informal workers have a signi cant impact on the size of the informal sector. We nd that changes in the distribution, for a given size, create a range of variation of 19.35pp. Analogously, changes in size create a range of variation of 5.7pp, resulting in a total range of variation of 51.2pp. This implies that it is possible to substantially increase formalization by rising extra tax resources as long as they accrue to formal workers. We illustrate the validity of our approach simulating the introduction of Seguro Popular.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://ftp.itam.mx/pub/academico/inves/alonso/13-08.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Centro de Investigacion Economica, ITAM in its series Working Papers with number 1308.

as in new window
Length: 35 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:cie:wpaper:1308

Contact details of provider:
Postal: Camino a Sta. Teresa 930, Mexico, D.F. 10700
Phone: +525 628 4197
Fax: +525 628 4058
Email:
Web page: http://cie.itam.mx/
More information through EDIRC

Related research

Keywords: Informal Sector; Search; Tax and Transfer Programs; Seguro Popular;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Michael P. Keane & Robert Moffitt, 1995. "A structural model of multiple welfare program participation and labor supply," Working Papers 557, Federal Reserve Bank of Minneapolis.
  2. Costas Meghir & Renata Narita & Jean-Marc Robin, 2012. "Wages and Informality in Developing Countries," NBER Working Papers 18347, National Bureau of Economic Research, Inc.
  3. Zoë Kuehn, 2010. "Tax rates, governance, and the informal economy in high-income countries," Working Papers 2010-07, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales, revised 22 Oct 2011.
  4. D'Erasmo, Pablo N. & Moscoso Boedo, Hernan J., 2012. "Financial structure, informality and development," Journal of Monetary Economics, Elsevier, vol. 59(3), pages 286-302.
  5. Dessy, Sylvain & Pallage, Stéphane, 2001. "Taxes, Inequality and the Size of the Informal Sector," Cahiers de recherche 0112, Université Laval - Département d'économique.
  6. Mariano Bosch & Julen Esteban-Pretel, 2009. "Cyclical Informality and Unemployment," CIRJE F-Series CIRJE-F-613, CIRJE, Faculty of Economics, University of Tokyo.
  7. Aureo de Paula & Jose A. Scheinkman, 2009. "Value Added Taxes, Chain Effects and Informality," PIER Working Paper Archive 09-030, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  8. Mark Gradstein & Alberto E. Chong, 2004. "Inequality, Institutions, and Informality," IDB Publications 6824, Inter-American Development Bank.
  9. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  10. Rodrigo Barros, 2008. "Wealthier But Not Much Healthier: Effects of a Health Insurance Program for the Poor in Mexico," Discussion Papers 09-002, Stanford Institute for Economic Policy Research.
  11. Gabriela Inchauste & Mark Gradstein & Era Dabla-Norris, 2005. "What Causes Firms to Hide Output? the Determinants of Informality," IMF Working Papers 05/160, International Monetary Fund.
  12. Guillermo E. Perry & William F. Maloney & Omar S. Arias & Pablo Fajnzylber & Andrew D. Mason & Jaime Saavedra-Chanduvi, 2007. "Informality : Exit and Exclusion," World Bank Publications, The World Bank, number 6730, July.
  13. Antunes, Antonio R. & Cavalcanti, Tiago V. de V., 2007. "Start up costs, limited enforcement, and the hidden economy," European Economic Review, Elsevier, vol. 51(1), pages 203-224, January.
  14. Mariano Bosch & Julen Esteban-Pretel, 2013. "The Labor Market Effects of Introducing Unemployment Benefits in an Economy with High Informality," GRIPS Discussion Papers 12-20, National Graduate Institute for Policy Studies.
  15. Alberto Chong & Mark Gradstein, 2004. "Inequality, Institutions, and Informality," Research Department Publications 4377, Inter-American Development Bank, Research Department.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cie:wpaper:1308. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Diego Dominguez).

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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