Unité mixte de recherche 7235

Tax Policies and Informality in South Africa

Eliane El Badaoui, Riccardo Magnani

[en]We use a micro-macro simulation model to evaluate the effects of labor income tax policies in South Africa. The country is characterized by a high unemployment rate while employment in the informal sector is relatively low. Our approach is based on the aggregation of the preferences of individuals who choose among (i) working in the formal sector,(ii) working in the informal sector, and (iii) not working. We quantify the effects of different tax policies on the individual’s labor supply choices (formal/informal employment, work/leisure) and at the macro level (GDP, equilibrium wages, size of the informal sector, and unemployment rate). We further analyze the effects in terms of income distribution, poverty and inequality. We find that the introduction of a negative income tax system reduces inequality and poverty but, at the same time, discourages people from participating in the labor market and working in the formal sector and, consequently worsens the equitye efficiency trade-off. We find however that the equity-efficiency trade-off can be improved by introducing (i) a (revenue-neutral) tax system which combines a sufficiently high at rate (25%) and lump-sum transfer paid only to formal workers; (ii) an expansionary policy (a reduction in total taxes or an increase in public expenditures). Interestingly, even though they increase the informal sector, these reforms reduce inequality and poverty through a reduction in the level of unemployment.[/en]

AGENDA

mercredi 19 janvier 2022

Économies du monde musulman

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Mapping and understanding the drivers of fuel poverty in MENA countries: The case of Egypt and Jordan

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Doctorants

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Déterminants des inégalités numériques chez les ménages français

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Law, Institutions and Economics in Nanterre (LIEN)

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En visio

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Recherche et Economie et Socioéconomie Politique, des Institutions et des Régulations (RESPIR)

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Lunch

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Nouveaux doctorants

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Groupe de travail Economie Comportementale

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Recherche et Economie et Socioéconomie Politique, des Institutions et des Régulations (RESPIR)

Nicolas LAURENCE (Université Lyon 2 & TRIANGLE)

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Law, Institutions and Economics in Nanterre (LIEN)

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Paradoxes de vote et décision des juges constitutionnels : une approche empirique sur le cas français

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