Ok vámos

Páginas: 9 (2049 palabras) Publicado: 29 de enero de 2011
Chapter 7

Productivity and Illegal Firms.

The Labor Market When Social Security Is Evaded.

Social programs have implications for firms’ labor costs: firms hiring salaried workers pay (w f +T f), while firms having relationships with nonsalaried workers, including the one-person firm of the self-employed individual, pay w i . Salaried labor is indispensable for many economic activities,but depending on formal and informal wage rates, the difference in the cost of salaried and nonsalaried labor can be close to 50 percent. In the absence of alternatives, such a large difference in the relative cost of labor would distort the composition of output, the economy would be characterized by a large share of GDP from self-and comisionista employment and small share from activities inwhich salaried labor is indispensable. But firms and workers do have an alternative: to bypass the official government (here labeled L if to denote informal workers who should be formal).

The equilibrium level of evasion.

Workers and firms evade social security when de gains from doing so exceed the cost. Firms want to expand salaried employment but save on labor cost. A precondition forevasion is that β f (w f ´´ + β f T f)). The key points is this: evasion makes all workers better off.

There are two reasons why worker and formal firms are better off with evasion. One, before evasion there is a waste of (1- β f )T f per worker employed, to be distributed between workers and firms. With evasion, part of that waste is recovered through gains for formal firms and all workers(including informal workers). Two since there are more informal workers, the resources channeled to social protection programs increase, and as see in chapter 6, neither firms nor workers pay for those resources.

Turning to economic efficiency, one is tempted to argue that efficiency increases with evasion because the efficiency cost of labor misallocation are reduced. But that need not be true,because as informal employment expands, the costs of social protection programs increase and the resources to pay the additional benefits must come from somewhere.

First, there is a direct relationship between México’s social programs and the composition of the labor force. The division of the labor force between salaried and nonsalaried and formal and informal workers shown in figure 5-1, as wellas the size of the various subsets in table 5-1, is endogenous to social programs.

In other words, wages in México reflect, in addition to education, capital stock, short-run shocks, and so on ( the standard determinants) , a system of taxes in and subsidies to different forms of labor and the partly legal and partly illegal reaction of workers and firms to that system through various levels ofevasion.

But I am arguing at the analysis od the labor market and the design of social policy in México needs to be complement by a framework akin to the one sketched here.

Illegal and Legal Firms.

So far, illegal behavior has resulted only from firms’´ evasion of the non-wage cost of salaried labor. To capture firms ´decisions in a more realistic setting, I incorporate two additionalfeatures of México’s tax and regulatory systems: taxes on firms ´profits (impuestos sobre la renta) imposed by the servicio de administracion tributaria (SAT), the operational agency of the finance ministry in charge of collections, and the registration cost of formality, including compliance with regulations like those that require titling the property on which the firms is established andregistering it as business premise. I incorporate these two elements very simply; I assume firms have to pay profit taxes at the rate tπ and registration cost of C; for simplicity I assume that C is independent of output.

There are there benefits to a firm of being informal and illegal: savings of T f per workers hired, saving of C, and savings on profit taxes. On the other hand firms face two...
Leer documento completo

Regístrate para leer el documento completo.

Estos documentos también te pueden resultar útiles

  • ok cuando ahi vamos
  • ok ok ok ok ok
  • Ok Ok Ok Ok
  • ok ok ok ok
  • ok ok ok ok
  • Ok Ok Ok
  • ok ok ok
  • vamos

Conviértase en miembro formal de Buenas Tareas

INSCRÍBETE - ES GRATIS