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Do labour market policies reduce the informal economy more effectively than enforcement and deterrence?
Date
2020-05-01
Author
Saraçoğlu, Dürdane Şirin
Metadata
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Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License
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In 2006, Turkish policymakers introduced new measures to reduce informality and encourage formality, in which the primary means of combatting informality were stricter enforcement of existing labor market laws and deterrence through fines, without any appropriate adjustments in formal labour costs. In this paper we show that even without any change in enforcement and deterrence, in an economy growing with capital accumulation like in Turkey, informality gradually and naturally declines. Furthermore, we propose alternative labour market policy changes like reductions in minimum wage and payroll taxes to reduce informal employment share, and assess the relative effectiveness of these policy changes. (C) 2020 The Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.
Subject Keywords
Economics and Econometrics
URI
https://hdl.handle.net/11511/37409
Journal
JOURNAL OF POLICY MODELING
DOI
https://doi.org/10.1016/j.jpolmod.2020.01.010
Collections
Department of Economics, Article