informality
-
How can governments fund unemployment insurance in low-income settings?
Unemployment insurance (UI) in Senegal can provide significant welfare gains, but given high levels of informality and a lack of transparency about workers’ status, these gains depend on programme design. UI funded through payroll taxes is effective and feasible as long as the ratio of formal workers to the benefit level is sufficiently high, while UI funded through consumption taxes generally offers lower welfare benefits but is more robust to fraudulent claims.
-
VAT in developing countries: flawed, but irreplaceable
Informality, compliance costs, and weak administrative capacity all constrain the effectiveness of VAT in lower-income countries. However, it is a crucial source of revenue that is better than the alternatives, so governments should focus on reforms that make the VAT more efficient.
-
Unemployment benefits are very effective in highly informal labour markets
Evidence from Mauritius shows the consequences of losing a formal job in a labour market characterised by high rates of informal employment are significant. Unemployment benefits help mitigate these effects, while generating only small disincentive effects on labour supply.
-
How the wage-setting power of firms shapes Peru’s economy
Labour market power hinders development by suppressing wage employment and also fostering a dependence on self-employment that undermines the effectiveness of policies aiming to boost wages and wage employment
-
Informality
-
Informal labour markets and rent-extraction from the unemployment insurance system: Evidence from Brazil
When eligible for unemployment benefits, workers and firms make strategic layoffs in the presence of informal labour markets
-
Can temporary wage incentives increase formal employment? Experimental evidence from Mexico
In Mexico, where formal jobs have low starting salaries which increase rapidly over time, temporary wage subsidies to young high school graduates lead to sustained formal employment gains
-
Informality, consumption taxes and redistribution
Taxes on consumption help governments in developing countries redistribute thanks to the presence of large informal sectors
-
Mexico’s economic growth puzzle: A conversation with Santiago Levy
Why has economic growth stuttered in Mexico despite, on the face of it, implementation of sensible economic policies by successive governments?