Abstract

In 2012, the Colombian Government reduced employer payroll contributions from 29.5 to 16.0 percent. Two years later, the informality rate had diminished by about 4.0 percentage points. This paper attempts to estimate how much of this reduction was due to the tax reform, isolating the impact of other macroeconomic variables. A natural approach to performing this task is to apply a difference-in-differences methodology using a household survey panel. Since the Colombian survey does not have a panel structure, we simulated one using a matching difference-in-differences methodology. According to the results, the tax reform is associated with a 4.8-percentage-point decrease in the informality of workers affected by the reform in the thirteen main metropolitan areas. This represents approximately half the reduction of the relevant informality rate during that period, affecting mostly salaried men and workers in general with low levels of education.

pdf

Additional Information

ISSN
1533-6239
Print ISSN
1529-7470
Pages
pp. 125-155
Launched on MUSE
2017-11-13
Open Access
No
Back To Top

This website uses cookies to ensure you get the best experience on our website. Without cookies your experience may not be seamless.