Policies against informality in segmented labour markets: a general equilibrium analysis applied to Uruguay
AbstractIn this paper we analyze the impact of some policies against informality on the labor market, poverty and income distribution in Uruguay, using a general equilibrium model that considers a dual labor market segmented by skill, and microsimulations. We simulate two sets of policies: payroll tax cuts and increased enforcement in the informal sector. Both sets of policies are effective in reducing informality. Payroll tax cuts on unskilled labor increase informality among medium-skilled workers, but in spite of that they are successful in reducing poverty and improving income distribution. Enforcement policies have a negative impact on wages, especially for unskilled workers. The net effect on poverty is two-sided: on the one hand this policy promotes an increase in poverty as a consequence of wages falling, but on the other hand poverty falls because the formal demand for labor increases.
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Bibliographic InfoPaper provided by Department of Economics - dECON in its series Documentos de Trabajo (working papers) with number 0408.
Length: 29 pages
Date of creation: Dec 2007
Date of revision:
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informality; labor market; general equilibrium; policies; poverty; microsimulations;
Find related papers by JEL classification:
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
- J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
- J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-21 (All new papers)
- NEP-CMP-2008-06-21 (Computational Economics)
- NEP-LAM-2008-06-21 (Central & South America)
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- Carmen Estrades & María Inés Terra, 2009. "Commodity prices have risen sharply since 2006. This may benefit developing countries specialized on primary exports, but poverty may increase. Uruguay is a net exporter of primary products and a net ," Documentos de Trabajo (working papers) 3209, Department of Economics - dECON.
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