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Table 3 Fiscal reform effects on employment and real earnings (percentage change with respect to the benchmark)

From: The effect of payroll taxes on employment and wages under high labor informality

  Reform scenario A Reform scenario B
Total employment(a) 0.3 0.5
 Salaried formal 3.7 3.4
 Salaried informal 0.9 0.5
 Own-account −4.3 −3.4
Real earnings   
Formal gross wage −4.0 −4.0
Formal net wage(b) 4.9 4.8
Informal gross wage 2.9 2.8
Informal net wage(b) 3.0 2.9
After-tax average earnings, own-account 2.8 2.6
After-tax average earnings, employers 4.0 4.6
  1. Notes:
  2. (a)Salaried plus own-account workers.
  3. (b)Net of taxes/subsidies.
  4. Reform scenario A assumes a fall of 22.4 percent in labor taxes (equivalent to a decrease of 13.5 percentage points) and a lump-sum transfer to formal workers equivalent to 9 percent of their benchmark wage rate.
  5. Reform scenario B assumes scenario A plus an increase in the corporate income tax rate from 33 to 34 percent.