Labor market institutions, taxation and the underground economy
AbstractThe paper aims at qualifying the links between labor-market-institutions, taxation, tax monitoring, and underground economic activity. The proposed model is a continuous time matching model with one commodity roduced either overground or underground. Underground economic activity arises because of partial compliance with regulations and tax contributions imposed by the government. Vacancies and workers search are directed at a specific labor market. Workers are heterogenous in the subjective cost they face when operating in the irregular sector. Analytical and numerical investigations suggest that interactions between regular and irregular activities can affect standard results of policy interventions. In that respect, the paper supports the view that policies aiming at increasing individuals benefits of participating in the regular sector are more desirable than a deterrence policy.
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Bibliographic InfoPaper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/1888.
Date of creation: Jan 2004
Date of revision:
Publication status: Published in Journal of Public Economics, 2004, Vol. 88, no. 1-2. pp. 395-418.Length: 23 pages
Informal economy; Labor; Taxation; Market;
Other versions of this item:
- Fugazza, Marco & Jacques, Jean-Francois, 2004. "Labor market institutions, taxation and the underground economy," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 395-418, January.
- E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
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