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Tax Policies and Informality in South Africa

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  • Eliane El Badaoui

    () (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Riccardo Magnani

    ()

Abstract

Using a micro–macro simulation approach, we evaluate the effects of different tax policies in South Africa. The country is characterised by a high unemployment rate, while the informal sector remains relatively small. The effects of the simulated tax policies are quantified at the macro level, on the individual's labour supply choices, and on income distribution, inequality and poverty. We find that the equity‐efficiency trade‐off can be improved by introducing a system combining a sufficiently high flat rate and a lump‐sum transfer paid only to formal workers. Interestingly, even though it increases the informal sector, this reform reduces inequality and poverty through a reduction in unemployment. © 2019 John Wiley & Sons, Ltd.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Eliane El Badaoui & Riccardo Magnani, 2019. "Tax Policies and Informality in South Africa," Post-Print hal-02124902, HAL.
  • Handle: RePEc:hal:journl:hal-02124902
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-02124902
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    References listed on IDEAS

    as
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    Keywords

    [No keyword available];

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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