IMPOSTO SOBRE TRABALHO E SEU IMPACTO NOS MERCADOS DE TRABALHO FORMAL E INFORMAL

This paper aims to analyze the effects of payroll taxes on the determination of the degree of informality and the main indicators of the Brazilian labor market, considering both aggregate and disaggregate indicators by qualification level. For that purpose, a two- sector model is developed, where firms of both sectors use qualified and non-qualified workers as inputs for production. The demand for labor is determined by workers' productivity while the supply side is represented by wage curves, which are specific to each sector and qualification group. The results show that reducing payroll taxes has a significant effect over the formality degree and increases both employment level and earnings.