Financial disincentives to formal work: Evidence from Ecuador and Colombia

H. Xavier Jara and David Rodríguez

No wp-2019-14, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: The aim of this paper is to quantify the financial cost that informal workers would incur in the event of entering formality, accounting for potential earnings gains upon entry. To do so, we use representative microdata from Ecuador and Colombia, together with detailed tax-benefit models, and simulate transitions to formal employment for all workers observed in informality in the data, with informality defined as non-affiliation to social security.

Keywords: Formalization; Informal sector; Informality; Tax-benefit microsimulation; Tax; SOUTHMOD (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-iue
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Citations: View citations in EconPapers (3)

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