RT Journal Article
T1 Fiscal Adjustments and the Shadow Economy in an Emerging Market
T2 Ajustes Fiscales y la Economía Sumergida en un Mercado Emergente
A1 Costa Junior, Celso J.
A1 García-Cintado, Alejandro
A1 Usabiaga Ibáñez, Carlos
K1 DSGE Models
K1 Shadow Economy
K1 Fiscal Policy
K1 Emerging Economies
AB We build an open-economy dynamic stochastic general equilibrium (DSGE) model that allows us to: (i) derive a time series for labor informality in Brazil spanning the period2004–2018, whose evolution is consistent with the behavior of the main series provided  by Pesquisa Nacional por Amostra de Domicílios (PNAD); (ii) run dynamic simulationsshowing that, in the presence of a large informal labor market (around 50% of the total labor force), expenditure-cutting measures lead, at worst, to mild short-run recessions inthe formal sector and are likely to foster public debt sustainability. Likewise, adjustments through some kinds of distortionary taxation, mainly the corporate tax, and to a lesserextent, the consumption tax, also seem to improve both public debt dynamics and fiscal collection without a significant cost in terms of output. Thus, in countries with largeinformal economies experiencing fiscal woes, expenditure-based consolidations, as well as some sorts of tax-based adjustments, should be relied upon.
PB Cambridge University Press
YR 2021
FD 2021
LK https://hdl.handle.net/10433/19882
UL https://hdl.handle.net/10433/19882
LA en
NO Macroeconomic Dynamics, 25, 2021, 1666-1700
NO Agradecimientos: We would like to thank, without implicating, two anonymous referees and the Editors of Macroeconomic Dynamics, Luis de Araujo, Ali Bayar, Javier Ferri, Bernardo Guimaraes, Tim Kehoe, Miguel Leon-Ledesma, Alessandro Maravalle, Diego Martinez-Lopez, Daniel Oto-Peralias, Stephen L. Parente, Diego Romero-Ávila, Manuel Toledo, as well as participants at the VI Regional Modelling Workshop, European Commission, October 25–26, 2018, at the XLIII International Conference on Regional Science, November, 15–17, 2017, Seville, at the 17th SAET Conference on Current Trends in Economics, Faro, June 25–30, 2017, at the seminar entitled “Usando a teoria para medir aatividade informal”, FGV-EESP, September 9, 2016, São Paulo, and at the EcoMod2016 International Conference on Economic Modeling, July 6–8, 2016, Lisbon, for the helpful comments made on an earlier version of this paper.We are also grateful to the Research Groups PAIDI SEJ-513 and ECO2017-86780-R for the funding provided. All the remaining errors are our sole responsibility. Address correspondence to: Alejandro C. Garcia-Cintado, Pablode Olavide University. Carretera de Utrera, Km. 1, 41013 Seville, Spain. e-mail: agcintado@upo.es. Phone: +34 954348994. Fax: +34 954349339.
NO Proyectos de investigaciónFECYT -- PROPUESTAS DE MEJORA PARA LA ECONOMIA ESPAÑOLA: DESEMPLEO, EMPA...Grupo PAIDI SEJ 513
NO Departamento de Economía, Métodos Cuantitativos e Historia Económica
DS RIO
RD May 24, 2026