In developing countries, informality is mainly concentrated among younger and older workers and low-skilled workers. In this study, we propose a dual labor market theory that highlights how frictions and taxation in the formal sector and educational choices interact to shape the informality rate over the life-cycle. We develop a life-cycle model with search frictions, skill heterogeneities, and endogenous educational choices. We carry out a numerical analysis and show that our model reproduces remarkably well the life-cycle patterns of informality, non-employment, and formal employment in Argentina. We analyze several public policies and show that an educational grant reduces both informality and non-employment and may be fully financed by the extra tax revenues generated by the increase in formal employment and wages. Lowering taxes may achieve similar results but is detrimental to the government budget, despite increasing the base on which they are levied.
In developing countries, informality is mainly concentrated among younger and older workers and low-skilled workers. In this study, we propose a dual labor market theory that highlights how frictions and taxation in the formal sector and educational choices interact to shape the informality rate over the life-cycle. We develop a life-cycle model with search frictions, skill heterogeneities, and endogenous educational choices. We carry out a numerical analysis and show that our model reproduces remarkably well the life-cycle patterns of informality, non-employment, and formal employment in Argentina. We analyze several public policies and show that an educational grant reduces both informality and non-employment and may be fully financed by the extra tax revenues generated by the increase in formal employment and wages. Lowering taxes may achieve similar results but is detrimental to the government budget, despite increasing the base on which they are levied.
Auteur(s)
Julien Albertini1
, Anthony Terriau1, 2
1
GATE Lyon Saint-Étienne -
Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne
( 102550 )
- 93, chemin des Mouilles 69130 Écully
6, rue Basse des Rives 42023 Saint-Étienne cedex 02
- France
École normale supérieure de Lyon ( 6818 )
;
Université Lumière - Lyon 2 ( 33804 )
;
Université Claude Bernard Lyon 1 ( 194495 )
;
Université de Lyon ( 301088 )
;
Université Jean Monnet - Saint-Étienne ( 300284 )
;
Centre National de la Recherche Scientifique UMR5824 ( 441569 )
2
GAINS -
Groupe d'Analyse des Itinéraires et des Niveaux Salariaux
( 198500 )
- Université du Maine - Avenue Olivier Messiaen - 72085 Le Mans cedex 9
- France
Le Mans Université ( 7566 )
Licence
Paternité - Pas d'utilisation commerciale
Vulgarisation
Non
Comité de lecture
Oui
Audience
Internationale
Langue du document
Anglais
Nom de la revue
Journal of Economic Dynamics and Control
(ISSN : 0165-1889)
Publié par Elsevier
Revue non référencée dans Sherpa-Romeo
Date de publication
2019-08
Volume
105
Page/Identifiant
182-202
Domaine(s)
Sciences de l'Homme et Société/Economies et finances
Julien Albertini, Anthony Terriau. Informality over the life-cycle. Journal of Economic Dynamics and Control, 2019, 105, pp.182-202. ⟨10.1016/j.jedc.2019.06.007⟩. ⟨halshs-02188426⟩