Can Taxes Help Ensure a Fair Globalization?
This paper analyzes whether taxation can be successfully used to reduce the incidence of labor informality and achieve higher equality in a globalized economy. To this purpose, it develops a two-area model: a developed country and an emerging count...
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World Bank, Washington, DC
2019
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| Online Access: | http://documents.worldbank.org/curated/en/365031565623998467/Can-Taxes-Help-Ensure-a-Fair-Globalization http://hdl.handle.net/10986/32268 |
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okr-10986-322682022-09-20T00:14:26Z Can Taxes Help Ensure a Fair Globalization? Langot, Francois Merola, Rossana Oh, Samil INFORMAL SECTOR TRADE LIBERALIZATION TAX REFORM TRADE POLICY ELASTICITY OF SUBSTITUTION TAXATION INEQUALITY LABOR FORMALIZATION EQUITY This paper analyzes whether taxation can be successfully used to reduce the incidence of labor informality and achieve higher equality in a globalized economy. To this purpose, it develops a two-area model: a developed country and an emerging country. The two areas differ according to the size of the informal sector, which is characterized by a more flexible labor market and lower productivity. To illustrate the potential role of taxation in achieving a more fair income distribution, the paper introduces a trade shock to simulate the effects of trade liberalization. Trade expansion has often been blamed for leading to an expansion of the informal sector and a widening of wage income disparities. In this context, the paper analyzes whether a budget-neutral tax reform -- switching the tax burden from payroll taxes paid by firms operating in the formal sector to a consumption tax -- can mitigate possible adverse effects of trade liberalization and support labor formalization. The effects of taxation are seen in the context of the trade-offs between growth, labor formality and equity. The analysis suggests that small improvements in formalization, resulting from the tax reform, come at the cost of widening income inequality. To reduce the incidence of low-quality jobs, tax policy interventions should go hand in hand with more effective social protection systems and labor laws. 2019-08-16T15:16:45Z 2019-08-16T15:16:45Z 2019-08 Working Paper http://documents.worldbank.org/curated/en/365031565623998467/Can-Taxes-Help-Ensure-a-Fair-Globalization http://hdl.handle.net/10986/32268 English Policy Research Working Paper;No. 8975 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
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Digital Repository |
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Foreign Institution |
| institution |
Digital Repositories |
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World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
INFORMAL SECTOR TRADE LIBERALIZATION TAX REFORM TRADE POLICY ELASTICITY OF SUBSTITUTION TAXATION INEQUALITY LABOR FORMALIZATION EQUITY |
| spellingShingle |
INFORMAL SECTOR TRADE LIBERALIZATION TAX REFORM TRADE POLICY ELASTICITY OF SUBSTITUTION TAXATION INEQUALITY LABOR FORMALIZATION EQUITY Langot, Francois Merola, Rossana Oh, Samil Can Taxes Help Ensure a Fair Globalization? |
| relation |
Policy Research Working Paper;No. 8975 |
| description |
This paper analyzes whether taxation can
be successfully used to reduce the incidence of labor
informality and achieve higher equality in a globalized
economy. To this purpose, it develops a two-area model: a
developed country and an emerging country. The two areas
differ according to the size of the informal sector, which
is characterized by a more flexible labor market and lower
productivity. To illustrate the potential role of taxation
in achieving a more fair income distribution, the paper
introduces a trade shock to simulate the effects of trade
liberalization. Trade expansion has often been blamed for
leading to an expansion of the informal sector and a
widening of wage income disparities. In this context, the
paper analyzes whether a budget-neutral tax reform --
switching the tax burden from payroll taxes paid by firms
operating in the formal sector to a consumption tax -- can
mitigate possible adverse effects of trade liberalization
and support labor formalization. The effects of taxation are
seen in the context of the trade-offs between growth, labor
formality and equity. The analysis suggests that small
improvements in formalization, resulting from the tax
reform, come at the cost of widening income inequality. To
reduce the incidence of low-quality jobs, tax policy
interventions should go hand in hand with more effective
social protection systems and labor laws. |
| format |
Working Paper |
| author |
Langot, Francois Merola, Rossana Oh, Samil |
| author_facet |
Langot, Francois Merola, Rossana Oh, Samil |
| author_sort |
Langot, Francois |
| title |
Can Taxes Help Ensure a Fair Globalization? |
| title_short |
Can Taxes Help Ensure a Fair Globalization? |
| title_full |
Can Taxes Help Ensure a Fair Globalization? |
| title_fullStr |
Can Taxes Help Ensure a Fair Globalization? |
| title_full_unstemmed |
Can Taxes Help Ensure a Fair Globalization? |
| title_sort |
can taxes help ensure a fair globalization? |
| publisher |
World Bank, Washington, DC |
| publishDate |
2019 |
| url |
http://documents.worldbank.org/curated/en/365031565623998467/Can-Taxes-Help-Ensure-a-Fair-Globalization http://hdl.handle.net/10986/32268 |
| _version_ |
1764476188688908288 |