The exemption of payroll: an application of the overlapping generations model to Brazil

Abstract

In order to assess the long-term impact of release of the payroll on the economy, we built a model of overlapping generations (overlapping generations models) with finite life, risk of death and social security. The goal is not only to measure the macroeconomic effects, but also assess how the exemption affects families according to age. The results showed that the exemption from payroll shy caused increases in product, capital and long-term consumption without major sacrifices for the economy in the short term. On the side of families in the short term, there are losses for the elderly and gains for the working population, especially for the younger ones. In the long run welfare gains are unrepresentative.