Payroll Taxes, Social Security, and Informality: The 2012 Tax Reform in Colombia

Pablo Adrian Garlati-Bertoldi

A chapter in Change at Home, in the Labor Market, and On the Job, 2020, vol. 48, pp 153-193 from Emerald Group Publishing Limited

Abstract: I evaluate how the tax reform of 2012 reduced informality in Colombia both theoretically and empirically. Theoretically, I develop a labor market model and obtain simulations indicating that the reform should reduce informality significantly. Empirically, I obtain difference-in-difference estimates from two household surveys. Estimates from the repeated cross-sections data indicate small, short-term effects and large long-term effects. Estimates from the household survey panel data are in line with these results. I also simulate difference-in-difference estimates with different combinations of changes in payroll taxes and enforcement indicating that large improvements would have been needed to obtain the corresponding econometric estimates.

Keywords: Informality; payroll taxes; enforcement; social security; Colombia; difference in difference; cross sectional data; panel data; simulations; D21; H24; H30; J32; J38; J46 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rleczz:s0147-912120200000048005

DOI: 10.1108/S0147-912120200000048005

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