Eduardo Lora

Employment and taxes in Latin America: An empirical study of the effects of payroll, corporate income and value-added taxes on labor outcomes

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.

Entrepreneurship in Latin America : a step up the social ladder?

This book looks at both the potential and limits of policies to promote entrepreneurship as an important vehicle for social mobility in Latin America and the Caribbean. Who are the regions entrepreneurs? They tend to be middle-aged males with secondary and, often, tertiary education who represent only a small segment of the economically active population in the six countries considered in this book. They come from families in which a parent is, or was, an entrepreneur. In fact, a parents occupation is more important in the decision to become an entrepreneur than a parents wealth, income or education. Middle class entrepreneurship tends to dominate the sample in part since this is the majority class in society. However, as a percentage of each social class, entrepreneurship tends to be higher in the upper class, followed by the middle and lower class. Entrepreneurs concentrate in micro enterprises with fewer than five employees. They enjoy greater social mobility than employees and the self-employed, but this mobility is not always in the upward direction. Entrepreneurs face multiple obstacles including stifling bureaucracy, burdensome tax procedures, and lack of financing, human capital, technological skills, and supportive networks. The support of family and friends and a modicum of social capital help cope with these obstacles to entrepreneurship.

Using Life Satisfaction Data to Identify Urban Problems, Prioritize Local Public Expenditures and Monitor the Quality of Urban Life

Combined with housing price data, life satisfaction data can be used to assess the implicit value that individuals attach to all types of urban amenities and features, and to compute to what extent those values are reflected in housing market prices. This chapter explains the theoretical underpinnings of the methodology and reviews the results obtained when applying it to a handful of Latin American cities. It also describes how the results can illuminate public investment and finance decisions oriented towards maximizing the life satisfaction or urban dwellers. The methodology proposed can be easily integrated into the urban monitoring systems in place in a growing number of cities.

The Distance between Perception and Reality in the Social Domains of Life

The distance between perception and reality with respect to the social domains of life is often striking. Using survey data collected on Latin American countries, this paper provides an overview of the main empirical findings on the gaps between perception and reality in four social domains-health, employment, the perception of security, and social ranking. The overview emphasizes the psychological biases that may explain the gaps. Biases associated with cultural values are very relevant with respect to health and job satisfaction. Cultural differences across countries are pronounced in perceptions of health, while cultural differences across socioeconomic groups are more apparent with respect to job satisfaction. Affect and availability heuristics are the dominant sources of bias in the case of perceptions of security. The formation of subjective social rankings appears to be less culturally dependent but more dependent on the socioeconomic development in the country. The gaps between objective and subjective indicators in the social domains of life are a rich source of data to help understand how perceptions are formed, identify important aspects of peoples lives that do not appear in official indicators, inform public debate on social policy, and shed light on public attitudes on key social issues.

Emprego e impostos na América Latina: Um estudo empírico dos efeitos dos impostos sobre a folha de pagamento, a renda dos negócios e sobre o valor agregado no mercado de trabalho

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.

Empleo e impuestos en América Latina: un estudio empírico de los efectos de los impuestos a la nómina, la renta de los negocios y al valor agregado en el mercado de trabajo

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.

Feeling Middle Class and Being Middle Class: What Do Subjective Perceptions Tell Us?

Economic definitions of middle class often rely on arbitrary boundaries defined by measures of central tendency, quantiles of the distribution or absolute thresholds based on a measurable characteristic, such as income or consumption.1 In practice, there is little agreement on what and how big the middle class is (the variety of approaches undertaken by the contributors to this volume bears out this assertion). Likewise, most economists often ignore that membership in a given class is also driven by social status, the relative individual situation in a social hierarchy affected by life opportunities, lifestyles and a diversity of attitudes.

A New Way of Monitoring the Quality of Urban Life in Latin America

Quality of life rankings across major cities frequently attract a great deal of global press. The often-quoted Mercer (2010) ranking currently ranks Vienna as the city with the highest quality of life of the 221 cities covered, with Zurich and Geneva not far behind. The declared intention of the Mercer ranking is to ‘help governments and major companies place employees on international assignments’. However, the factors that are important for international executives are quite different to those that are of importance to residents. In Europe the Urban Audit system of Eurostats monitors the quality of life in 357 cities with more than 300 indicators more aligned to residents’ likes and dislikes. This system has the explicit (and ambitious) intention to shed light on ‘most aspects of quality of life, e.g., demography, housing, health, crime, labour market, income disparity, local administration, educational qualifications, environment, climate, travel patterns, information society and cultural infrastructure’ (Feldman 2008).