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Infrastructure Accumulation in Developing Countries: the Role of the Informal Sector

Author

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  • W. Addessi
  • M. Delogu

Abstract

In this paper, we study the optimal labor income taxation to finance infrastructure in developing countries characterized by high informality. We show that the presence of labor market segmentation, induced by a binding minimum wage, affects the optimal level of taxation/infrastructure and influences how the economy reacts to policy changes in terms of both the size of the informal sector and the income distribution among high- and low- skilled workers.

Suggested Citation

  • W. Addessi & M. Delogu, 2021. "Infrastructure Accumulation in Developing Countries: the Role of the Informal Sector," Working Paper CRENoS 202103, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    • Handle: RePEc:cns:cnscwp:202103
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    Keywords

    Infrastructure; Informality; Optimal Taxation; Development;
    All these keywords.

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