Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/89080
Authors: 
Lora, Eduardo
Fajardo, Deisy Johanna
Year of Publication: 
2012
Series/Report no.: 
IDB Working Paper Series IDB-WP-334
Abstract: 
This paper empirically explores the effects of payroll taxes, value-added taxes and corporate income taxes on a variety of labor market outcomes such as employment, unemployment, informality, and wages. Using national-level data on labor variables for 15 Latin American countries, the results indicate that the effects of each tax are distinctly different and may depend on several aspects of labor and tax institutions. Payroll taxes reduce employment and increase labor costs when their benefits are not valued by workers, but otherwise increase labor participation and do not raise labor costs. Value-added taxes increase informality and reduce skilled labor demand. In contrast, corporate income taxes may help reduce informality, especially among low-education workers but, when tax enforcement capabilities are strong, may reduce labor participation and employment of medium- and high-education workers.
JEL: 
H24
H25
J21
J30
J32
Document Type: 
Working Paper

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