The Effect of Firm-Size Dependent Policies on the Economy: The Case of the Repecos Law in Mexico

This paper analyzes the effects of a firm-size dependent law, on the Mexican economy which includes a small taxpayers' regime known in Mexico as the Repecos regime. It looks for effects on macroeconomic variables and on the industrial structure, on the proportion of small firms in the economy, which are originated in such regime. It uses a general equilibrium model calibrated on the U.S. economy and applies an environment of high taxes on labor and high tax evasion, characteristic of the Mexican economy, so that their effects can be distinguished from those of the Repecos regime.