Research
Research
World Development (forthcoming) with Olivier Bargain and H. Xavier Jara
Abstract: Latent feelings of economic vulnerability and social stagnation may have catalyzed the unprecedented uprisings that shook Latin America and other parts of the world in 2018-2019. We document this process in the context of Chile, leveraging survey data on protest participation and its potential determinants. Specifically, we construct a “social gap” index, measuring the disconnect between objective and perceived social status. Our findings suggest that this social gap predicts protest involvement beyond factors such as perceived living costs, the subjective value of public services, peer influence, or political demands. Notably, it complements broader feelings of anger toward inequalities in explaining protests.
Submitted with Olivier Bargain and H. Xavier Jara
Abstract: To finance increased public spending and social programs, Latin America's tax systems need to develop further. Yet taxation can reduce the tax base by discouraging formal employment. Evidence on the intensity of the problem is limited and tends to focus on specifically large reforms of the tax system. Conversely, and to improve external validity, we study whether routine changes in tax policies also alter labor market formalization. Our approach is based on grouped-data estimations of formal employment responses to policy changes. We exploit tax variation across three countries (Bolivia, Ecuador and Colombia) and three periods (2008, 2014/15, 2019). We use precise calculations of counterfactual tax burdens when moving from informal to formal jobs, i.e. formalization tax rates (FTRs). For most countries and pairs of years, FTRs have a negative and significant effect on formal employment, particularly when wages are held constant across periods – in order to extract the pure policy effect – and in a series of sensitivity checks.
Minimum Wages, Contribution Floors, and Informality (Job Market Paper)
Abstract: Minimum wages played a crucial role in curbing earnings inequality in Latin America. However, there is still mixed evidence on the economic effects in developing countries, especially when raised in tandem within a context of high informality. Furthermore, in many of these settings, the statutory minimum wage simultaneously anchors the base for social insurance contributions (SIC), creating a fixed per-worker cost of formal employment. Workers and firms can avoid labor legislation (and thus formal costs) by operating informally. Exploiting this institutional linkage across Bolivia, Colombia, Ecuador, and Peru, I construct exposure measures based on changes in the minimum contribution liability and study worker and firm responses using harmonized household surveys (2008--2022) and enterprise panels (2006--2024). Groups and firms more exposed to increases in contribution floors reallocate toward informality and self-employment, and formal firms contract in employment and sales. At the same time, formal earnings compress around the minimum.
Eliciting the role of tax-benefit policies in reducing poverty and inequality over two decades
with Olivier Bargain, Ana Bottega, Rodrigo Chang, Mariana Dondo, Pedro Forquesato, H. Xavier Jara, David Rivera
Abstract: To finance increased public spending and social programs, Latin America's tax systems need to develop further. Yet taxation can reduce the tax base by discouraging formal employment. Evidence on the intensity of the problem is limited and tends to focus on specifically large reforms of the tax system. Conversely, and to improve external validity, we study whether routine changes in tax policies also alter labor market formalization. Our approach is based on grouped-data estimations of formal employment responses to policy changes. We exploit tax variation across three countries (Bolivia, Ecuador and Colombia) and three periods (2008, 2014/15, 2019). We use precise calculations of counterfactual tax burdens when moving from informal to formal jobs, i.e. formalization tax rates (FTRs). For most countries and pairs of years, FTRs have a negative and significant effect on formal employment, particularly when wages are held constant across periods – in order to extract the pure policy effect – and in a series of sensitivity checks.
Social Leader Killings and Deforestation.
Covid, gender and labor supply in Mexico
The link between Eradication Policies and Unexpected Crime in Colombia : An IV approach
Do taxes really redistribute wealth ? (05/2023)
There are more billionaires called Jeff than afro-american billionaires - and other inequalities (09/2023)
Inequalities: Well-being is also a matter of subjective placement (12/2023)
Do not fear! - the real economic consequences of migration (02/2024)