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Unreported Labour

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Author Info

  • Barth, Erling

    ()
    (Institute for Social Research, Oslo)

  • Ognedal, Tone

    ()
    (University of Oslo)

Abstract

Unreported labour by one worker in a firm increases the probability of detection for his fellow workers, not only for himself. The firm takes this external effect into account. As a consequence, unreported work becomes rationed by the firms demand, rather than determined by demand equal supply. The gap between supply and demand increases with firm size. An empirical analysis on survey data supports theses theoretical predictions. Using a bivariate probit model, we find evidence of excess supply of unreported work in firms. We also find that the gap between supply and demand increases with firm size.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1893.

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Length: 34 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1893

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Keywords: tax evasion; hidden labour market;

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References

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  1. Reinganum, Jennifer F. & Wilde, Louis L., 1985. "Income tax compliance in a principal-agent framework," Journal of Public Economics, Elsevier, vol. 26(1), pages 1-18, February.
  2. Lacroix, G. & Fortin, B., 1991. "Utility-Based Estimation of Labor Supply Functions in the Regular and Irregular Sectors," Cahiers de recherche 9020, Université Laval - Département d'économique.
  3. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 818-860, June.
  4. Reinganum, Jennifer F & Wilde, Louis L, 1986. "Equilibrium Verification and Reporting Policies in a Model of Tax Compliance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(3), pages 739-60, October.
  5. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
  6. Lemieux, Thomas & Fortin, Bernard & Frechette, Pierre, 1994. "The Effect of Taxes on Labor Supply in the Underground Economy," American Economic Review, American Economic Association, vol. 84(1), pages 231-54, March.
  7. Jørgensen, Øystein & Ognedal, Tone & Strøm, Steinar, 2005. "Labor supply when tax evasion is an option," Memorandum 06/2005, Oslo University, Department of Economics.
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Citations

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Cited by:
  1. Barth, Erling & Cappelen, Alexander W. & Ognedal, Tone, 2013. "Fair tax evasion," Discussion Paper Series in Economics 11/2013, Department of Economics, Norwegian School of Economics.
    • Barth, Erling & Cappelen, Alexander W. & Ognedal, Tone, 2006. "Fair Tax Evasion," Memorandum 07/2006, Oslo University, Department of Economics.
  2. Leibfritz, Willi, 2011. "Undeclared economic activity in central and eastern Europe -- how taxes contribute and how countries respond to the problem," Policy Research Working Paper Series 5923, The World Bank.

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