Labour market effects of social security contributions reform in Serbia
In Serbia the inactivity rate of the working-age population is close to 40%, among the highest in Europe. The country also faces a high informal employment rate of 24%. Previous research has argued that high levels of informality and inactivity are mostly due to a high effective tax wedge a...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Faculty of Economics, Belgrade
2016-01-01
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| Series: | Ekonomski Anali |
| Subjects: | |
| Online Access: | http://www.doiserbia.nb.rs/img/doi/0013-3264/2016/0013-32641608073Z.pdf |
| Summary: | In Serbia the inactivity rate of the working-age population is close to 40%,
among the highest in Europe. The country also faces a high informal
employment rate of 24%. Previous research has argued that high levels of
informality and inactivity are mostly due to a high effective tax wedge at
low wage levels caused by a minimum base for calculation of social security
contributions (SSC), sudden withdrawal of means-tested benefits once formal
income is earned, and low progressivity of income tax. This paper evaluates
the impact of the minimum SSC base reform scenarios on labour supply and
employment formalization using tax and benefit micro-simulation models
together with the structural discrete choice labour supply model based on the
Survey on Income and Living Conditions Data. Although we do not find positive
employment effects of the reform, it would be premature to deduce that
abolishment of the minimum SSC base is not needed. At this stage in our
research, until alternative labour-supply modelling is applied, with both
sector and hours of work choice alternatives, it is only safe to conclude
that the proposed reform will not significantly contribute to the
transformation of informal full-time to formal full-time jobs. |
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| ISSN: | 0013-3264 1820-7375 |