Labor Market Rigidities and Informality in Colombia

Mondragón-Vélez, Camilo; Peña, Ximena; Wills, Daniel

doi:10.1353/eco.2010.0009

Cited by 55 publications

(37 citation statements)

References 20 publications

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“…According to this classification, salaried workers in the model not only include the salaried employees in the data but also housekeeping workers and all unpaid workers in establishments with more than one person. Interestingly, a 35 percent share of formal workers in the model is well within the estimates reported by Bernal (2009) and Mondragón-Vélez et al (2010) for Colombia.…”

Section: Parameter Valuessupporting

confidence: 82%

“…Their results suggest that a 10 percent increase in the payroll tax reduces formal employment by between 4 and 5 percent, after controlling for the plants' characteristics. In contrast to the previous studies based on labor demand estimates, Mondragón-Vélez et al (2010) study the effect of non-wage labor costs on the probability of being informal. For that purpose, the authors propose a probit model that allows individual characteristics to be controlled for.…”

Section: Literature Reviewmentioning

confidence: 99%

“…These taxes are imposed on employers to finance a series of social programs such as pensions, health benefits, in-kind transfers for lowincome households, training, and so forth. Third, labor informality in Colombia is high regardless of the criteria used to measure it and ranges from 56 to 67 percent of the total workforce (see, for example, Bernal, 2009, andMondragón-Vélez et al 2010). In fact, high non-wage costs and labor informality may be related to each other by discouraging employers to hire workers under all the requirements mandated by the law.…”

Section: The Colombian Tax Reformmentioning

confidence: 99%

“…First, non-wage labor costs are very high: previous to the 2012 reform, they accounted for more than 60 percent of the average wage rate Moller, 2012). Second, the share of informal workers is also high, regardless of the definition used, and ranges from 56 to 67 percent of the total workforce (Bernal, 2009;Mondragón-Vélez et al 2010).…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

The effect of payroll taxes on employment and wages under high labor informality

Antón

2014

IZA J Labor Develop

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This paper evaluates the effects of a fall in payroll taxes on employment and wages in the presence of high labor informality. For that purpose, the paper examines a recently approved tax reform in Colombia especially targeted to promote labor formality. The model suggests that the reform would increase total employment by between 0.3 to 0.5 percent and formal employment by between 3.4 to 3.7 percent over the pre-reform scenario. In addition, formal wage rates would increase by 4.9 percent as a result of the reform. This finding suggests that the pass-through effect in labor markets may be large in these economies.JEL codes: E62; H26; J21; O170

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Section: Parameter Valuessupporting

confidence: 82%

Section: Literature Reviewmentioning

confidence: 99%

Section: The Colombian Tax Reformmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

The effect of payroll taxes on employment and wages under high labor informality

Antón

2014

IZA J Labor Develop

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“…A study for Colombia (Mondragón-Vélez, Peña, and Wills, 2010) shows that a 10 percent increase in non-wage labor costs increases informality by 8 percent. Higher non-wage labor costs are associated with increased transitions from formal to informal employment and with decreased transitions from informal to formal employment.…”

Section: The Labor Effects Of Payroll Taxesmentioning

confidence: 99%

Employment and Taxes in Latin America: An Empirical Study of the Effects of Payroll, Corporate Income and Value-Added Taxes on Labor Outcomes

Lora

Fajardo-González

2012

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper empirically explores the effects of payroll taxes, value-added taxes and corporate income taxes on a variety of labor market outcomes such as employment, unemployment, informality, and wages. Using national-level data on labor variables for 15 Latin American countries, the results indicate that the effects of each tax are distinctly different and may depend on several aspects of labor and tax institutions. Payroll taxes reduce employment and increase labor costs when their benefits are not valued by workers, but otherwise increase labor participation and do not raise labor costs. Value-added taxes increase informality and reduce skilled labor demand. In contrast, corporate income taxes may help reduce informality, especially among low-education workers but, when tax enforcement capabilities are strong, may reduce labor participation and employment of medium-and high-education workers. Terms of use: Documents inJEL Classification: J21, J30, J32, H24, H25

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From Micro to Macro: Entrepreneurial Choice and Economic Growth Across Cities in a Developing Country

Gomez,

Aparicio,

Urbano

2023

Driving Complexity in Economic Development

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Labor Market Rigidities and Informality in Colombia

Cited by 55 publications

References 20 publications

The effect of payroll taxes on employment and wages under high labor informality

The effect of payroll taxes on employment and wages under high labor informality

Employment and Taxes in Latin America: An Empirical Study of the Effects of Payroll, Corporate Income and Value-Added Taxes on Labor Outcomes

From Micro to Macro: Entrepreneurial Choice and Economic Growth Across Cities in a Developing Country

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