The labor market effects of payroll taxes in a middle-income country: evidence from Colombia

We use a panel of manufacturing plants from Colombia to analyze how the rise in payroll tax rates over the 1980’s and 1990’s affected the labor market. Our estimates indicate that formal wages fall by between 1.4% and 2.3% as a result of a 10% rise in payroll taxes. This “less-than-full-shifting†is likely to be the result of weak linkages between benefits and taxes and the presence of downward wage rigidities induced by a binding minimum wage in Colombia. Because the costs of taxation are only partly shifted from employers to employees, employment should also fall. Our results indicate that a 10% increase in payroll taxes lowered formal employment by between 4% and 5%. In addition, we find less shifting and larger disemployment effects for production than non-production workers. These results suggest that policies aimed at boosting the relative demand of low-skill workers by reducing social security taxes on those with low earnings may be effective in a country like Colombia, especially if tax cuts are targeted to indirect benefits. Keywords; payroll taxes, shifting, wage rigidity, minimum wages

The labor market effects of payroll taxes in a middle-income country: Evidence from Colombia

We use a panel of manufacturing plants from Colombia to analyze how the rise in payroll tax rates over the 1980’s and 1990’s affected the labor market. Our estimates indicate that formal wages fall by between 1.4% and 2.3% as a result of a 10% rise in payroll taxes. This 'less-than-full-shifting' is likely to be the result of weak linkages between benefits and taxes and the presence of downward wage rigidities induced by a binding minimum wage in Colombia. Because the costs of taxation are only partly shifted from employers to employees, employment should also fall. Our results indicate that a 10% increase in payroll taxes lowered formal employment by between 4% and 5%. In addition, we find less shifting and larger disemployment effects for production than non-production workers. These results suggest that policies aimed at boosting the relative demand of low-skill workers by reducing social security taxes on those with low earnings may be effective in a country like Colombia, especially if tax cuts are targeted to indirect benefits.Payroll taxes, shifting, wage rigidity, minimum wages

Stings of some species of Lordomyrma and Mayriella (Formicidae: Myrmicinae)

The sting apparatus and pygidium are described for eight of 20 Lordomyrma species and one of five Mayriella species. The apparatus of L. epinotaiis is distinctly different from that of other Lordomyrma species. Comparisons with other genera suggest affinities of species of Lordomyrma to species of Cyphoidris and Lachnomyrmex, while Mayriella abstinens Forel shares unusual features with those of Proatta butteli

The Effect of Structural Reforms on Productivity and Profitability Enhancing Reallocation: Evidence from Colombia

In the U.S., some sectoral evidence suggests that growth is driven mainly by productivity enhancing reallocation. In countries with greater barriers to entry and imperfect competition, the reallocation process may be inefficient. Therefore, for developing countries, an open question is whether reallocation is productivity enhancing. Using a unique plant-level longitudinal dataset for Colombia for the period 1982-1998 we examine the interaction between market allocation, productivity and profitability. Given the important trade, labor and financial market oriented reforms in Colombia in 1990, we explore whether and how the contribution of reallocation changed. Our data include plant-level quantities and prices. Using plant prices, we propose a sequential methodology to estimate productivity and demand shocks. First, with plant-level physical output data, we estimate total factor productivity (TFP) using downstream demand to instrument for inputs. Then, with plant-level price data, we estimate demand shocks and mark-ups in the inverse-demand equation, using TFP to instrument for output. We characterize the evolution of TFP and demand shock distributions. Market reforms are associated with rising overall productivity that is driven by reallocation away from low- and towards high-productivity businesses; and, the allocation of activity across businesses is less driven by demand factors.

Partnering With Parents and Families to Support Immigrant and Refugee Children at School

Describes the mental health needs of immigrant and refugee children and RWJF's Caring Across Communities initiative to support partnerships between schools and families, community organizations, and agencies to address them. Includes program profiles

Comparative analysis of different preparation methods of chalcogenide glasses: Molecular dynamics structure simulations

Two different preparation methods (liquid-quenching and evaporation) of chalcogenide glasses have been investigated by molecular dynamics simulations. Our particular aim was to determine how the structural changes occur due to the different preparation methods. We applied a classical empirical three-body potential of selenium to describe the interactions between atoms. Our simulation shows that a significant difference can be observed in the homogeneities

The effects of structural reforms on productivity and profitability enhancing reallocation: Evidence from Colombia

Estimates for the U.S. suggest that at least in some sectors productivity enhancing reallocation is the dominant factor in accounting for producitivity growth. An open question, particularly relevant for developing countries, is whether reallocation is always productivity enhancing. It may be that imperfect competition or other barriers to competitive environments imply that the reallocation process is not fully e?cient in these countries. Using a unique plant-level longitudinal dataset for Colombia for the period 1982-1998, we explore these issues by examining the interaction between market allocation, and productivity and profitability. Moreover, given the important trade, labor and financial market reforms in Colombia during the early 1990's, we explore whether and how the contribution of reallocation changed over the period of study. Our data permit measurement of plant-level quantities and prices. Taking advantage of the rich structure of our price data, we propose a sequential mehodology to estimate productivity and demand shocks at the plant level. First, we estimate total factor productivity (TFP) with plant-level physical output data, where we use downstream demand to instrument inputs. We then turn to estimating demand shocks and mark-ups with plant-level price data, using TFP to instrument for output in the inversedemand equation. We examine the evolution of the distributions of TFP and demand shocks in response to the market reforms in the 1990's. We find that market reforms are associated with rising overall productivity that is largely driven by reallocation away from low- and towards highproductivity businesses. In addition, we find that the allocation of activity across businesses is less driven by demand factors after reforms. We find that the increase in aggregate productivity post-reform is entirely accounted for by the improved allocation of activity.TFP measurement, productivity and demand decompositions, structural reforms

Plant Turnover and Structural Reforms in Colombia

In a healthy economy, plant turnover increases aggregate productivity because efficient producers are more likely to survive. Given high entry and exit rates and the potential importance of turnover in accounting for aggregate productivity, in this paper we examine the determinants of plant exits and then examine how exits and other forms of output reallocation contribute to aggregate productivity. Using a unique plant-level longitudinal data set for Colombia for the period 1982-98, we examine the role of productivity and demand as well as input costs in determining plant exits. Moreover, given the important structural reforms introduced in Colombia during the early 1990s, we explore whether and how plant survival changed after these reforms. Our data permit measurement of plant-level quantities and prices, which allows us to decompose productivity and demand shocks and, in turn, to estimate the effects of these fundamentals on plant exit. We find that higher productivity, higher demand, and lower input prices decrease the probability of plant exit. We also find that the importance of physical efficiency and costs in determining exits increases after the introduction of structural reforms. Finally, a decomposition of aggregate productivity suggests that reallocation through entry and exit is important in accounting for the increase in aggregate productivity after the introduction of structural reforms. Copyright 2006, International Monetary Fund