nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2022‒11‒28
three papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Domestic revenue mobilization and informality: Challenges and opportunities for sub-Saharan Africa By Abel Gwaindepi
  2. The Short-Term Labor Market Impact of Venezuelan Immigration in Peru By Celia P. Vera; Bruno Jiménez
  3. Efectos fiscales del salario mínimo en Colombia By Luis E. Arango; Jesús A. Botero; Eleonora Dávalos; Daniela Gallo; Estefany Hernández

  1. By: Abel Gwaindepi
    Abstract: Effective domestic revenue mobilization has gained renewed urgency, especially in the light of the need to recover from the COVID-19 pandemic. In taxation debates, the 'informal sectors' have hitherto been assumed to be a part of the problem and implicitly mistaken for lucrative tax bases. First, I critically interrogate current conceptualizations of informality to highlight how the informality that materially affects revenue mobilization goes beyond the hitherto narrow focus on the visible informal sectors.
    Keywords: Domestic revenue mobilization, Shadow economy, Tax revenue, Informal sector, Informality, Technology
    Date: 2022
  2. By: Celia P. Vera (Universidad de Piura); Bruno Jiménez (Princeton University, CEDLAS & IIE-UNLP)
    Abstract: Peru is the second-largest recipient of Venezuelans worldwide. We combine newly available data on Venezuelans living in Peru and the Peruvian Household Survey to assess the impact of Venezuelan migration on natives’ wages and employment. The initial regression analysis exploits the variation in supply shifts across education-experience groups over time. It indicates that immigration in Peru had no adverse impact on native wages. However, the paper highlights that in Peru immigrants and natives with similar education and experience are likely to work in different occupations. The subsequent analysis based on occupational clustering confirms the null effect on wages and indicates that a 20% increase in immigrants decreases formal employment by 6%. We do not find evidence for changes in employment composition toward informality so that migration operates through the extensive margin of employment. We report evidence in favor of immigrants being a close substitute to the least productive natives, suggesting that firms substitute native formal labor for low-cost immigrant informal labor.
    JEL: J24 J31 J46
    Date: 2022–10
  3. By: Luis E. Arango; Jesús A. Botero; Eleonora Dávalos; Daniela Gallo; Estefany Hernández
    Abstract: Utilizando un modelo de equilibrio general computable calibrado para 2019, se simulan choques de diversas características al salario mínimo para establecer los efectos en las cuentas fiscales de la nación. Este documento es pionero en ese análisis. La evidencia sugiere efectos adversos de incrementos del salario mínimo por encima de la inflación pasada y el cambio en la productividad. Un aumento de estas características en 1% lleva el déficit del Gobierno General (GG) en 2022 de 5,6% del PIB a 5,7%. Si el incremento simulado es de 3,25%, como el ocurrido para 2022, lleva el déficit de 5,6% a 5,8% del PIB y al aumento del déficit total del Gobierno Nacional Central (GNC)y la deuda en 0,13 puntos porcentuales (pp) y 0,29 pp, respectivamente. La semi–elasticidad del déficit fiscal del GNC al salario mínimo es 0,04 mientras que la elasticidad del PIB al salario mínimo es –0,17. Cuando el escenario de simulación incluye hasta el año 2030, el deterioro de las finanzas públicas es mayor. Dependiendo de la magnitud y persistencia de los aumentos del salario mínimo, en ese año, la tasa de crecimiento del PIB puede caer hasta 39 puntos básicos (pb). De igual forma, se observan deterioros importantes en el déficit total y la deuda del GNC y en las trayectorias de gasto tanto en pensiones como en salud. En 2030 el déficit pasa de: 2,79% a 3,52% del PIB y la deuda pública se incrementa en más de 400 pb, mientras que los gastos en salud y pensión se incrementan en más de 20 pb cada uno. En todos los casos hay destrucción de empleo y aumento de la informalidad laboral. **** ABSTRACT: Using a computable general equilibrium model calibrated for 2019, shocks of various characteristics to the minimum wage are simulated to establish the effects on the nation's fiscal accounts. This document is a pioneer in that analysis. The evidence suggests adverse effects of increases in the minimum wage above past inflation and the change in productivity. An increase of these characteristics by 1% takes the General Government deficit in 2022 from 5.6% of GDP to 5.7%. If the simulated increase is 3.25%, as occurred for 2022, it takes the deficit from 5.6% to 5.8% of GDP and increases the total deficit of the Central National Government (CNG) and the debt by 0.13 percentage points (pp) and 0 .29pp, respectively. The semi-elasticity of the fiscal deficit of the CNG to the minimum wage is 0.04 while the elasticity of GDP to the minimum wage is –0.17. When the simulation scenario goes up to 2030, the deterioration of public finances is greater. Depending on the magnitude and persistence of the increases in the minimum wage, in that year, the GDP growth rate can fall to 39 basic points (bp). Similarly, important deteriorations are observed in the total deficit and the debt of the CNG and in the trajectories of expenditure in both pensions and health. In 2030 the deficit goes from: 2.79% to 3.52% of GDP and the public debt increases by more than 400 bp, while health and pension expenses increase by more than 20 bp each. In all cases there is job destruction and an increase in labor informality.
    Keywords: Salario mínimo, empleo formal, empleo informal, elasticidad de sustitución, sistema contributivo, régimen de prima media, déficit fiscal, deuda, minimum wage, formal employment, informal employment, elasticity of substitution, contributory system, prime media regime, fiscal deficit, debt
    JEL: H62 H63 J23 J31
    Date: 2022–11

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