Infrastructure Accumulation in Developing Countries: the Role of the Informal Sector

William Addessi and Marco Delogu

Working Paper CRENoS from Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia

Abstract: In this paper, we study the optimal labor income taxation to finance infrastructure in developing countries characterized by high informality. We show that the presence of labor market segmentation, induced by a binding minimum wage, affects the optimal level of taxation/infrastructure and influences how the economy reacts to policy changes in terms of both the size of the informal sector and the income distribution among high- and low- skilled workers.

Keywords: Infrastructure; Informality; Optimal Taxation; Development (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cwa, nep-isf, nep-iue and nep-knm
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Persistent link: https://EconPapers.repec.org/RePEc:cns:cnscwp:202103

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