ESSAYS ON DEVELOPMENT ECONOMICS: SPECIAL TAX REGIMES IN INFORMAL LABOR MARKETS AND SOCIAL RETURNS TO INFRASTRUCTURE INVESTMENTS

This dissertation contains two independent chapters on major constraints in developing economies: pervasive labor‑market informality and underinvestment in infrastructure. Chapter 1 — Special Tax Regimes in Informal Labor Markets. Using a two‑sector equilibrium search model with wage posting, estimated for low‑educated men in São Paulo, the chapter compares two size‑dependent policy instruments: stronger, progressive enforcement against informality and a smooth, revenue‑based special tax regime (STR) for small formal firms that phases out with size. In the model, stronger enforcement shifts activity toward formality and raises wages, output, and welfare with little change in unemployment. The STR’s effects are sensitive to design and market equilibrium: with fixed offer arrivals it fragments the formal sector and lowers GDP and welfare; when arrivals respond to market tightness, moderate relief yields small gains mainly via improved match quality, while deeper relief erodes revenue and dissipates gains. Chapter 2 — The Social Rate of Return on Road Infrastructure Investments. Motivated by the fact that roughly one billion people live more than two kilometers from an all‑season road, this chapter estimates country‑specific social rates of return to an additional kilometer of two‑lane highway across 55 emerging-market and developing economies (EMDEs) by combining macro production‑function estimates of the marginal product of public capital with hedonic, country‑specific construction costs from the World Bank’s ROCKS database. Returns are high but heterogeneous, median 55% (mean 97%), and decline with income; relative to a 7% U.S. benchmark for the social return on private capital, the median excess is about eightfold (roughly five times the pre‑liberalization equity premium that created Emerging Markets equity funds). A Dual‑Hurdle map summarizes where domestic and foreign efficiency conditions are met, and macro estimates are read alongside micro and financial evidence.