Quantifying the Impacts of Expanding Social Protection on Efficiency and Equity: Evidence from a Behavioral Microsimulation Model for Ghana

Robert Osei (), Jukka Pirttilä and Pia Rattenhuber ()
Additional contact information
Pia Rattenhuber: UNU-WIDER, Helsinki, Finland.

International Journal of Microsimulation, 2019, vol. 12, issue 1, 105-123

Abstract: A key challenge facing developing countries when they are gradually building up their social protection system is the presence of a large informal sector. Social safety nets should be expanded to reduce poverty, but financing social protection through higher taxes may reduce the number of formal-sector jobs available. The aim of this paper is to quantify the impacts of a revenue-neutral expansion of social protection in a developing country on both income distribution and efficiency which we measure via the impacts on formal sector work. Results from a new tax-benefit microsimulation model for Ghana, GHAMOD, are combined with the extensive margin elasticity of the share of formal work with respect to the tax wedge on formal labour, derived from repeated cross-section econometric estimates. The size of the estimated formality elasticity is modest and therefore the distributional gains of expanding cash transfer programmes are considerable, even when taking into account behavioural impacts.

Keywords: DEVELOPING COUNTRIES; SOCIAL PROTECTION; TAX-BENEFIT MICROSIMULATION; SOUTHMOD (search for similar items in EconPapers)
JEL-codes: H23 H31 O12 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.microsimulation.org/IJM/V12_1/IJM_12_1_4.pdf (application/pdf)

Related works:
Working Paper: Quantifying the impacts of expanding social protection on efficiency and equity: Evidence from a behavioural microsimulation model for Ghana (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ijm:journl:v:12:y:2019:i:1:p:105-123

Access Statistics for this article

International Journal of Microsimulation is currently edited by Matteo Richiardi

More articles in International Journal of Microsimulation from International Microsimulation Association
Bibliographic data for series maintained by Jinjing Li ().