Climate change and technology adoption with a large informal sector
What are the aggregate consequences of policies that target adopting more efficient technologies in an economy with a large informal sector? Using a heterogeneous agents model with endogenous occupation choice between workers and formal and informal entrepreneurs and calibrated to Mexico, we found t...
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| Format: | Article |
| Language: | English |
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Elsevier
2025-09-01
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| Series: | Latin American Journal of Central Banking |
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| Online Access: | http://www.sciencedirect.com/science/article/pii/S2666143824000292 |
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| _version_ | 1849232639841533952 |
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| author | Miguel Mascarúa Ricardo Montañez-Enríquez |
| author_facet | Miguel Mascarúa Ricardo Montañez-Enríquez |
| author_sort | Miguel Mascarúa |
| collection | DOAJ |
| description | What are the aggregate consequences of policies that target adopting more efficient technologies in an economy with a large informal sector? Using a heterogeneous agents model with endogenous occupation choice between workers and formal and informal entrepreneurs and calibrated to Mexico, we found that in economies with a large informal sector, a decrease in the overall tax rate increases by more the adoption of advanced technologies than in economies with a low informal sector. Furthermore, the burden on government revenues is lower in a highly informal economy. In addition, we find that such policies are more efficient than those that target adopting more advanced technologies because they tackle two distortionary problems: the informality rate and the low adoption of advanced technologies. Such policies become relevant, as we estimate that climate change can reduce aggregate production by up to 6.6% in the long-run. |
| format | Article |
| id | doaj-art-a07c84591e5a43d095dc6c8939e24c65 |
| institution | Kabale University |
| issn | 2666-1438 |
| language | English |
| publishDate | 2025-09-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Latin American Journal of Central Banking |
| spelling | doaj-art-a07c84591e5a43d095dc6c8939e24c652025-08-21T04:17:20ZengElsevierLatin American Journal of Central Banking2666-14382025-09-016310014710.1016/j.latcb.2024.100147Climate change and technology adoption with a large informal sectorMiguel Mascarúa0Ricardo Montañez-Enríquez1Dirección General de Investigación Económica. Banco de México, MexicoCenter for Latin American Monetary Studies (CEMLA), Mexico; Corresponding author.What are the aggregate consequences of policies that target adopting more efficient technologies in an economy with a large informal sector? Using a heterogeneous agents model with endogenous occupation choice between workers and formal and informal entrepreneurs and calibrated to Mexico, we found that in economies with a large informal sector, a decrease in the overall tax rate increases by more the adoption of advanced technologies than in economies with a low informal sector. Furthermore, the burden on government revenues is lower in a highly informal economy. In addition, we find that such policies are more efficient than those that target adopting more advanced technologies because they tackle two distortionary problems: the informality rate and the low adoption of advanced technologies. Such policies become relevant, as we estimate that climate change can reduce aggregate production by up to 6.6% in the long-run.http://www.sciencedirect.com/science/article/pii/S2666143824000292InformalityHeterogeneous producersTechnology adoptionClimate change |
| spellingShingle | Miguel Mascarúa Ricardo Montañez-Enríquez Climate change and technology adoption with a large informal sector Latin American Journal of Central Banking Informality Heterogeneous producers Technology adoption Climate change |
| title | Climate change and technology adoption with a large informal sector |
| title_full | Climate change and technology adoption with a large informal sector |
| title_fullStr | Climate change and technology adoption with a large informal sector |
| title_full_unstemmed | Climate change and technology adoption with a large informal sector |
| title_short | Climate change and technology adoption with a large informal sector |
| title_sort | climate change and technology adoption with a large informal sector |
| topic | Informality Heterogeneous producers Technology adoption Climate change |
| url | http://www.sciencedirect.com/science/article/pii/S2666143824000292 |
| work_keys_str_mv | AT miguelmascarua climatechangeandtechnologyadoptionwithalargeinformalsector AT ricardomontanezenriquez climatechangeandtechnologyadoptionwithalargeinformalsector |